Fuel costs passed on to flyers
Updated: 2008-07-01 07:42
(HK Edition)
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Ticket surcharges on China Southern Airlines' domestic flights are as much as 50 percent higher starting today.
The nation's largest airline raised the levy from 100 to 150 yuan on journeys of more than 800 km (497 miles) to help offset rising fuel costs.
The increase was announced by the Civil Aviation Administration of China and the National Development and Reform Commission on a government website.
The fees on shorter flights are up between 60 and 80 yuan.
The increases follow a 25 percent rise in domestic jet-fuel prices introduced on June 20 as part of a wider Chinese effort to cut energy use and to cool economic growth. The higher prices for jet-fuel - most carriers' biggest expense - will cost domestic carriers about 15 billion yuan more a year, according to China Southern Chairman Liu Shaoyong.
"It's far from enough," said Li Jun, an analyst at Everbright Securities Co. "It can only be regarded as a psychological relief for airlines that won't save them from losing money this year."
The Hong Kong-listed China Southern fell 2.5 percent to HK$3.10. Air China, the nation's second-largest carrier, slipped 2 percent to HK$3.84, while China Eastern Airlines dropped 0.8 percent to HK$2.45.
Concerns about higher fuel prices and slower traffic growth have caused the three carriers to fall by more than 60 percent this year in Hong Kong trading.
Chinese travel growth slowed in the first five months, hampered by the country's worst snowstorms in 50 years and its most powerful earthquake in 58 years.
Inflation is also running near a 12-year high and the mainland's stock market has fallen by half from its peak in October.
"Higher surcharges will help a lot," China Southern's Liu said in a June 22 interview. He rated this as the worst period for Chinese carriers since the SARS outbreak in 2003.
China Eastern Chairman Li Fenghua remains optimistic about the company's operations.
He said yesterday that the airline shouldn't face any major problems achieving a net profit in the first half of the year.
"We did well in the first quarter. I see no problems in being profitable in the first half," the chairman told reporters on the sidelines of a shareholders' meeting, adding that full-year profits are currently hard to estimate.
Agencies
(HK Edition 07/01/2008 page2)