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CAAC to cut oil surcharge on airfares
( 2001-12-31 10:12 ) (1 )

Special oil charges imposed on air tickets since last November are set for a downward spiral next month.

The special fees are to be slashed to 8 per cent of the total value of the ticket on Tuesday from its current level of 14 per cent.

Sources with industry watchdog General Administration of Civil Aviation of China (CAAC) said a notice had been distributed to domestic airlines about the price cut.

CAAC began to impose the special oil charges in November last year when the international oil price rocketed to nearly US$30 a barrel.

The move aimed to transfer part of the airlines' heavy oil cost to passengers to help them get through the difficult time.

CAAC had made it clear when imposing the special oil charges that the fees would fluctuate with price changes in the international oil market.

But the administration has decided that now is the time to lower the charges.

It is an official response to the sharply declining international oil price, which has plummeted to less than US$20 a barrel last month.

The China Aviation Oil Supplies Corporation, the monopoly oil supplier of the aviation industry, will begin to provide aviation oil at a lower price to domestic airlines in January, providing scope for the price-cut.

Sources with CAAC said the special oil charges might be amended further if international oil prices continue to fluctuate.

In China's pricing system, the special oil charges imposed by CAAC were not equal to ticket price.

The total face value of an air ticket consisted of two parts: the basic ticket price and the special oil charges.

The latter is only regarded as preferential measures implemented inside the aviation industry, and CAAC has the right to raise or cut the charges.

But CAAC will have to hold a public hearing supervised by the State Development Planning Commission -- the country's highest pricing authority -- before any changes could be made on the ticket price.

Representatives of ordinary passengers, experts, airlines and CAAC officials can exchange opinions at the hearing, and CAAC would then adjust the ticket price afterwards by taking all interests into account.

Sources with the Financial Department of CAAC, which is responsible for pricing policies, confirmed changes to special oil charges are the internal affairs of the aviation industry according to China's pricing policies and need not be discussed through hearings.

The sources suggested the air ticket price is unlikely to change around Spring Festival when demand for transportation peaks due to severe competition from roads and railways.

So without changes to ticket prices, a public hearing is unlikely to happen inside the aviation industry in the near future.