China's biggest jet-fuel distributor will raise prices by 210 yuan (US$27.96) a ton in the first quarter of this year, an official of China Eastern Airlines has told China Business News.

 

First-quarter jet-fuel prices were raised to "help resolve China National Aviation Fuel Group Corp's cost gap," the China Eastern official said.

 

The increase is the second in less than three months after the National Development and Reform Commission, the country's economic planner, raised the factory price of gasoline, diesel and kerosene by about 10 percent, or 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 oil for February delivery rose 44 US 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 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 for passengers.

 

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.

 

(Shanghai Daily January 22, 2008)