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Fuel prices down, air fares follow
Last Updated(Beijing Time):2007-01-18 14:51
China's domestic airline passengers will pay less for fares from this Sunday.

Airlines have decided to cut jet fuel surcharges in response to a reduction in the price of aviation kerosene.

The carriers were granted approval to lower the rate to 50 yuan (6.4 U.S. dollars) per flight for each passenger, from 60 yuan, on flights shorter than 800 kilometers.

The National Development and Reform Commission and the General Administration of Civil Aviation made the announcement in a joint statement yesterday.

For flights of 800 kilometers or longer, the surcharge will be slashed to 80 yuan from 100 yuan, the statement said.

Infants who receive a 90 percent discount from the full fare are still exempt from the charge. Children who pay half fare, disabled soldiers, and police officers injured in the line of duty will pay only half the new rate.

It's the first time the fuel surcharge has been cut since its introduction in March 2005.

The surcharge allows carriers to reflect fuel price fluctuations in their fares, and has become a significant earner for most airlines that underwent losses in the first half of 2006.

The carriers have raised the surcharges five times in the past two years to ease costs fueled by mounting oil prices.

The latest adjustment follows a weekend jet fuel price reduction by 90 yuan per ton. The fuel now costs 5,450 yuan a ton.

The new measures came a little late compared with foreign air carriers as China lacks a mature mechanism to reflect the fluctuation of global oil prices, analysts said.

Major airlines flying between China and Japan, however, have already cut the fuel surcharges.

China Southern Airlines and China Eastern Airlines, for instance, have cut the surcharge to 36 dollars from the former 40 dollars on flights from China to Japan, the carriers said.

"The reduction won't dent much of airlines' income as the adjustment is mild," said Zhu Anping, an analyst with Shenyin & Wanguo Securities.

"Many domestic carriers are expected to turn a profit in 2006 from huge losses in the first half, thanks to the surcharge collection, and the proceeds from the yuan's appreciation."

China Southern Airlines Group proved this yesterday when it said it expected to make a profit in 2006, reversing five years of losses.

The group amassed 46.5 billion yuan in revenue.

Source:Shanghai Daily 
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