Cathay Pacific, Dragon Air seek higher fuel surcharges

Posted at 06/02/10 3:29 PM

MANILA, Philippines - Two Hong Kong-based international airlines are seeking approval by the Civil Aeronautics Board (CAB) of their plan to raise fuel surcharges.

The fuel surcharge, imposed on top of regular fares, is a temporary relief given by regulators to allow airlines to mitigate losses from the rising cost of jet fuel.

Cathay Pacific Airways, Ltd. is asking the CAB to grant its petition to add $11.6 in the ticket price for flights between Hong Kong and South West Pacific, North America, Europe, Middle East, Africa, and South Asian sub-continent. From $55.60 or HK$434, the airline wants to raise its fuel surcharge to $67.20 or HK$524.

In May, the CAB approved a similar application from Cathay Pacific, which sought higher surcharges for its long- and short-haul flights.

For its other flights, Cathay Pacific wants fuel surcharge raised to $14.10 or HK$110 from $11.80 or HK$92.

On the other hand, Hong Kong Dragon Airlines, Ltd. wants to impose a fuel surcharge of $67.20 or HK$524 from the current $55.60 or HK$434 for flights between Hong Kong and South Asia.

The two airlines' respective petitions will be evaluated by the CAB in a hearing set on June 17.

Airlines in the region are still struggling to recover lost ground as air traffic is still tepid despite signs of global economic recovery.

The International Air Transport Association (IATA) recently said that Asia-Pacific carriers saw their strong growth slow to 3.5% in April from the 12.9% growth recorded in March.

IATA said Asia-Pacific carriers this year will see their combined $2.7 billion 2009 loss swing to a $900 million profits on the back of a rapid economic recovery being driven by China. Cargo markets are particularly strong with long-haul cargo capacity for shipments originating in Asia experiencing a capacity shortage. Demand is expected to grow by 12% in 2010.

However, improving economic conditions had also seen a steady rise in fuel prices. IATA raised its expected average oil price to $79 per barrel from the previously forecast of $75. That is an increase of $17 per barrel on the $62 average price for 2009.

IATA said the combined impact of increased capacity and a higher fuel price will add $19 billion to the industry fuel bill, bringing it to an expected $132 billion in 2010.

As a percentage of operating costs, this represents 26%, up from 24% in 2009.