Special oil charges imposed on air tickets since last November are set for a downward spiral next month.

The special fees are to be slashed to 8 percent of the total value of the ticket on Tuesday from its current level of 14 percent.

Sources with industry watchdog General Administration of Civil Aviation of China (CAAC) said a notice had been distributed to domestic airlines about the price cut.

CAAC began to impose the special oil charges in November last year when the international oil price rocketed to nearly US$30 a barrel.

The move aimed to transfer part of the airlines' heavy oil cost to passengers to help them get through the difficult time.

CAAC had made it clear when imposing the special oil charges that the fees would fluctuate with price changes in the international oil market.

But the administration has decided that now is the time to lower the charges.

It is an official response to the sharply declining international oil price, which has plummeted to less than US$20 a barrel last month.

The China Aviation Oil Supplies Corporation, the monopoly oil supplier of the aviation industry, will begin to provide aviation oil at a lower price to domestic airlines in January, providing scope for the price-cut.

Sources with CAAC said the special oil charges might be amended further if international oil prices continue to fluctuate.

In China's pricing system, the special oil charges imposed by CAAC were not equal to ticket price.

The total face value of air ticket consisted of two parts: the basic ticket price and the special oil charges.

The latter is only regarded as preferential measures implemented inside the aviation industry, and CAAC has the right to raise or cut the charges.

But CAAC will have to hold a public hearing supervised by the State Development Planning Commission -- the country's highest pricing authority -- before any changes could be made on the ticket price.

Representatives of ordinary passengers, experts, airlines and CAAC officials can exchange opinion at the hearing, and CAAC would then adjust the ticket price afterwards by taking all interests into account.

Sources with the Financial Department of CAAC, which is responsible for pricing policies, confirmed that changes to special oil charges are the internal affairs of the aviation industry according to China's pricing policies and need not be discussed through hearings.

The sources suggested the air ticket price is unlikely to change around spring festival when demand for transportation peaks due to severe competition from roads and railways.

So without changes to ticket prices, a public hearing is unlikely to happen inside the aviation industry in the near future.

Sources said the railways, which had improved average speeds to around 100 kilometers an hour, had turned up the pressure on short and middle distance air carriers.

And if the air ticket price was raised when demand for transport was at its highest, more travelers will be pushed to the railways.

During the 2001 spring festival, only 7 million people traveled by air. At a time when most trains were over-crowded with passengers returning home for family reunions, airlines could only fill 70 to 80 percent of seats.

(China Daily December 29, 2001)