Chinese carriers should get some relief in the fourth quarter as the Chinese government decided to cut the price of fuel by CNY570 ($82.37) per ton owing to the recent drop in international oil prices.
The reduction took effect Oct. 1. It marks the fifth time that Beijing has adjusted the domestic fuel price. It introduced a CNY210 per ton increase in the first quarter, a CNY80 drop in the second quarter, a CNY1,500 hike on June 20 and a CNY720 addition on July 8.
HSBC noted that China Southern Airlines is expected to benefit most from the most recent domestic cut as it has the largest number of domestic routes, which comprise 80% of its total.
China Eastern Airlines Board Secretary Luo Zhuping told ATWOnline yesterday that the cut "is good news for our domestic carriers, but it is hard to predict how much it will improve our financial performance as the decline of the domestic market in recent months still remains our biggest worry." He said CEA has no plan to reduce the fuel surcharge on its domestic network. Fuel costs currently account for around 40% of Chinese airlines' total operating expenses.