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November 14, 2009

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Air passengers start to pay fuel fees from today

PASSENGERS flying on domestic routes will start to pay fuel surcharges from today as some Chinese airlines begin to impose them after the nation's top planner introduced a mechanism that links the fees to fuel costs.

The carriers, including China Eastern Airlines, Shanghai Airlines, China Southern Airlines and Hainan Airlines, said yesterday they will charge 50 yuan (US$7.32) per person on routes longer than 800 kilometers and 20 yuan on other routes from today.

Air China will also make passengers pay the fuel surcharges from tomorrow.

Babies are exempted from the surcharge. Children, disabled servicemen and police officers who were injured on duty need only pay 50 percent of the surcharges.

The National Development and Reform Commission introduced a mechanism on Thursday that allows domestic carriers to impose fuel surcharges when the jet fuel price hits 4,140 yuan per ton. Airlines must shoulder at least 20 percent of the increased costs, the NDRC said.

"We expect most airlines will impose the surcharges at the upper limit to offset their costs although the commission suggests a market-oriented method," said Huang Jinxiang, an analyst at Guosen Securities Co. "Some smaller carriers may impose lower surcharges or suspend the collection to win more passengers, but that won't impact the whole industry."

Fuel costs are the biggest item for an airline at more than 40 percent of total costs.

With oil prices more than doubling from a low in February to US$80 a barrel, the NDRC has increased jet fuel prices four times this year to 5,190 yuan per ton in the latest adjustment.


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