The Chinese government has lowered domestic jet fuel prices 5.82% to CNY7,871 per ton ($1,256) as international fuel prices fluctuate.
Fuel costs, which account for more than 40% of China’s big three carriers’ total operating expenses, may give some relief to Chinese carriers. China’s big three carriers all cited higher fuel prices as one of the main reasons for their profit decline in 2012.
China Southern Airlines, which operates 80% of its flights on domestic routes, could see its fuel costs decrease by CNY1.79 billion annually. Air China and China Eastern Airlines, which operate 70% of their flights on domestic routes, could see their annual fuel costs reduce by CNY1.2 billion and CNY1.141billion, respectively.
Chinese carriers have also reduced fuel surcharges. Industry analysts predict that domestic airlines are expected to report a better financial performance in the coming summer peak period due to the reduction of domestic fuel prices, higher air fares and load factor resulting from the gradual recovery of domestic market demand.