Chinese passengers flying domestic routes with airlines including Air China will have to pay a fuel surcharge from Tuesday for the first time in three years, with the global air travel industry feeling the heat from higher oil prices.
The 10 yuan (1.56 US dollars) surcharge will apply to domestic routes operated by Air China and Kunming Airlines. Caixin reports that at least 26 other airlines, including China Eastern and China Southern, have recently added similar surcharges.
10 yuan per passenger may not sound like a lot, but data from the Civil Aviation Administration of China (CAAC) show there were 130.8 million domestic passengers in the year to March 2018. With the fuel surcharge, that would be an extra 1.308 billion yuan (204 million US dollars) per year.
Oil prices were actually at their lowest in two months on Tuesday, after months of steady increases that had seen Brent Crude break the 80 US dollars per barrel benchmark. Political uncertainty in Venezuela and the US decision to abandon the Iran nuclear deal have all pushed up prices, ahead of a crucial OPEC meeting later this month.
The operating profits of China’s three main airlines – Air China, China Eastern and China Southern – all fell by more than 25 percent in 2017, with oil prices and the development of China’s high-speed railway network all having an effect on the industry, despite rising passenger numbers.
Data from CAAC released earlier this year showed that flight delays in China increased by 50 percent in 2017, another potential factor that, coupled with rising prices, could push more domestic travelers towards high-speed trains.
A report by Morgan Stanley last year suggested Chinese airlines’ market share in domestic travel would fall from 13.4 percent to 12.5 percent in 2019.
Airlines across the world are all feeling the pinch of oil prices. A report by IATA (International Air Transport Association) released on Monday suggested the annual fuel bill for airlines this year would increase 26.1 percent to 188 billion US dollars.
IATA expects those additional costs, up from 135 billion US dollars in 2016, to be passed on partly to passengers through a 3.2 percent increase in fares.
Airlines are expected to make 33.8 billion US dollars in profit this year, down from IATA’s original forecast six months ago of 38.4 billion US dollars.