Eyes on Chinese airline regulator as it seeks difficult balance on fuel surcharge rises

A China Eastern Airlines plane takes off from Shanghai Hongqiao International Airport.

Photo: Xinhua Chinese airlines are mulling the introduction of higher fuel surcharges, as authorities strive to balance the impact of surging oil prices with the need to preserve airline margins and at the same time avoid dampening consumer demand.

Although a formal announcement from the national regulator is pending, at least two domestic airlines released notices on Wednesday about plans for sixfold surcharge increases, after another airline rescinded a similar notice on Tuesday.

According to notices put out by Xiamen Airlines and China United Airlines on Wednesday, the fuel surcharges for adult passengers on domestic routes of 800km and under will be increased from 10 yuan to 60 yuan, starting from Sunday.

Their domestic routes over 800km will see fuel surcharges rise to 120 yuan, up from 20 yuan.

Guiyang-based Colorful Guizhou Airlines sent a similar notice to ticket agents on Tuesday but withdrew the announcement hours later, citing the Civil Aviation Administration of China’s (CAAC) withdrawal of fuel price information for April, the Yicai financial news outlet reported.

The CAAC, which regulates domestic fuel surcharges, has yet to release an official notice on any price changes. “The CAAC is being careful because it doesn’t want to ruin demand by raising the price too much,” said independent aviation analyst Li Hanming. “However, if they don’t raise it, every ticket will be a loss.” The regulator needed to find a balance between fuel suppliers, carriers and passengers, he said.

Amid rising oil prices stemming from the Middle East conflict, China has capped domestic fuel price increases and pulled back on jet fuel exports to protect domestic energy security.

But Li said airlines were already feeling the pinch.

The looming fuel surcharge increases, coinciding with this weekend’s Ching Ming holiday and next month’s Labour Day break, would “definitely have a negative impact” on the travel market, he added.

Travellers might shift to shorter trips, or opt to take trains or drive instead of flying, Li said.

Fuel makes up one of the largest operating expenses for carriers.

It accounts for 35 to 38 per cent of the operating expenses of China’s ‘big three’ airlines – state-owned Air China, China Southern Airlines and China Eastern Airlines – according to a report released by HSBC last month.

But the analysts said China’s fuel surcharge mechanism typically lagg

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