Xinhua News Agency reported last Monday on reactions to the 40 yuan (US$4.94) fuel surcharge airlines have been allowed to add since August 1.

The General Administration of Civil Aviation of China (CAAC) announced on July 26 that carriers would be able to introduce the surcharge on internal flight fares this month in response to a joint appeal from the country's three largest airlines in May.

The CAAC had previously categorically refused Air China, China Eastern and China Southern's request on June 2.

Before the summer holidays, many tickets were on sale with 40-50 percent discounts, but in the cities of Beijing, Guiyang, Shanghai, Chengdu and Shenzhen increased demand has since pushed fares up, with 20 percent off at most.

Su Yang, manager of an air ticket agent in the capital's Xuanwu District, said the fuel surcharge on top of this would limit the number of ordinary people able to afford plane fares, and that "rail and road transport will benefit a lot."

The additional fee is unlikely to affect business travelers, the main users of air travel in China, but many ordinary travelers, less able to afford airfares anyway, could be even more discouraged because of the surcharge.

Last year, according to the CAAC, the number of air journeys passed the one billion mark, yet only 5 percent of the population actually flew.

Jia Changbin, general manager of China Aviation Oil Holding Company (CAOHC), the parent company of China Aviation Oil, said annual aviation oil consumption in China currently equals that of one Chicago airport.

"The trend is toward low-cost airfares," said Hu Angang, a senior Chinese Academy of Sciences (CAS)?economist. "Carriers unable to cut their prices to attract ordinary travelers will suffer."

Zhou Tianyong, vice?director of the Economic Research Center?with the?Party School of the Communist Party of China (CPC), said rising oil prices meant that, while airlines can temporarily pass costs on to passengers, this will not be possible in the long term since fares will become too expensive for people to afford.

An oversupply of airlines means that, although costs are going up, carriers are still fighting price wars for more customers, so fare increases are unlikely to last.

The CAAC said fuel costs totaled 3.5 billion yuan (US$437 million) in the first five months of 2005.

Zhao Zhongying, Hainan Airlines' CEO, said, "If crude oil prices go up to US$100 per barrel as estimated, double the current price, Chinese airlines will suffer an unprecedented blow. They must prepare and take corresponding measures."

Vice chief of the State Council's Development Research Center (DRC), Xie Fuzhan, said, "Chinese aviation has different problems from those of its foreign counterparts. Elsewhere, the supply of fuel is competitive, but in China it is monopolized by CAOHC. Overseas airlines can also use the futures market to protect them against expected increases."

The CAAC said it is drafting regulations whereby the price of air fuel will depend on the flight and the amount used, meaning carriers should be able to reduce their costs.

(China.org.cn by Zhou Jing, August 9, 2005)