Beijing raises domestic fuel prices by 1.43%

The Chinese government has raised domestic jet fuel prices to CNY7,465 ($1,186) per ton, up 1.43% from CNY7,360 per ton in January, dealing another blow to Chinese carriers that have already suffered from a decline in domestic market demand and air fares following the Chinese Spring Festival.

This is the first fuel price hike this year. In January, the Chinese government cut domestic jet fuel prices by 3.83% (ATW Daily News, Jan. 5). Since July 2011, Beijing has made monthly adjustments to domestic fuel prices based on fluctuating international fuel prices. 

Fuel costs comprise more than 40% of Chinese carriers’ operating expenses. China Southern Airlines (CZ), which operates 80% of its flights on domestic routes, could see its fuel costs increase by CNY273 million annually. Air China (CA) and China Eastern Airlines (MU), which operate 70% of their flights on domestic routes, could see their annual fuel costs rise by CNY234 million and CNY242 million, respectively.

Despite the increase of domestic fuel price, Chinese airlines cannot raise fuel surcharges to offset rising fuel costs.