Airlines trim costs as oil prices hit record

   Date:2008/06/04     Source:

AIR passengers are paying for rising oil costs as flights become dearer but airlines reduce their services.

Major domestic carriers raised fuel surcharges this month on international routes to offset the pressure of oil price increases. This was the second increase since January 1, when domestic airlines raised surcharges by 30 percent.

Fuel surcharges require approval from relevant aviation authorities before airlines can impose them.

Air China, the country's largest international carrier, raised surcharges on routes from the Chinese mainland to Europe and Australia by 33 percent to 800 yuan (US$115.5).

"Besides adding surcharges, Air China also reduced magazines for each seat. Now the carrier only provides one magazine for each passenger, compared with three magazines earlier," said Huang Bin, board secretary of the carrier.

A 300-seat jet normally carries 500 magazines and newspapers. By reducing these, airlines can save about one ton of fuel per day.

China Southern Airlines and Hainan Airlines also raised surcharges on routes from 600 yuan to 800 yuan between the mainland and Europe, the United States, Africa and the Middle East.

China Eastern Airlines announced it will raise surcharges on routes from the mainland to Korea and Hong Kong.

Oil prices set a new record of US$135 a barrel last month, and aviation fuel prices have grown by about 50 percent since the beginning of the year.

It is estimated that China Southern would lose 250 million yuan in profit if the fuel price is raised by 100 yuan per ton, while China Eastern would lose 220 million yuan and Air China would lose 180 million yuan.

Li Lei, an analyst with China Securities Co, said international routes were hit harder by rising prices.

"Domestic oil prices are still much lower than the international level, so airlines operating domestic routes won't be affected when the retail price remains unchanged," Li said.

Sources said some carriers have applied to the NDRC to raise surcharges on domestic routes.

Li forecast that the NDRC wouldn't raise domestic fuel prices because of concern over inflation, so surcharges on domestic routes won't be adjusted in the short term.

Meanwhile, some carriers have adjusted their routes, revamped jets and even canceled free food to save costs.

US Airways delayed the launch of its new Philadelphia-Beijing service for one year from 2009 to 2010 as it would have to pay more than US$90 million annually for fuel costs, almost double previous estimates.

Hong Kong-based Cathay Pacific Airways will focus on its most profitable markets, use fuel-efficient aircraft and cut routes if necessary, its chief executive Tony Tyler said last month.

Air Berlin, which launched services from Shanghai to Dusseldorf on May 2, will cut two weekly flights from July.

Northwest Airlines and Delta Air Lines removed paint from their cargo jets to reduce weight and save fuel. Paint can add 200 kilograms to the weight of a Boeing 747.

Shanghai Airlines has equipped "small wings" on its Boeing737 jets to reduce air resistance, which is expected to save US$800,000 a year.



 

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