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Fuel-price jump hits airlines
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China's biggest jet-fuel producer will raise prices 210 yuan (US$27.96) a ton in the first quarter of this year.


China Aviation Oil Ltd, the nation's monopoly jet-fuel provider, will raise prices of gasoline, diesel and jet kerosene, China Business News reported today.


The increase is the second in less than three months. The National Development and Reform Commission, the country's economic planner, raised the factory price of gasoline, diesel and kerosene 500 yuan a ton in November.


The fuel price for airlines depends on the factory price set by the commission and the sale price set by the company.


Light, sweet crude for February delivery rose 44 cents to settle at US$90.57 a barrel on the New York Mercantile Exchange on Saturday. The price hit US$100 for the first time on January 3.


Fuel, the biggest cost for airlines, accounts for more than 30 percent of total costs for China Eastern Airlines and Shanghai Airlines, the report said.


Ma Xiaoli, an analyst with Citic Securities, estimated that a fuel-price rise of 100 yuan a ton clips the net profit of China Eastern Airlines by 220 million yuan, that of China Southern Airlines by 250 million yuan and Air China by 180 million yuan.


The fuel-price jump may lead to higher fuel surcharges on passengers, the report said.


China allowed its domestic airlines to increase the fuel surcharge soon after the commission raised the price, which was intended to offset the pressure of oil-price rises on the aviation industry.


The fuel surcharge was raised from 50 yuan to 60 yuan a passenger for flights within 800 kilometers. For long-haul flights, the fee rose from 80 yuan to 100 yuan.


Any increase in the fuel surcharge requires official approval.


(Shanghai Daily January 21, 2008)


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