With the international prices for crude oil climbing back to 68 dollars, word spread quickly about domestic airlines reimposing the Bunker Adjustment Factor, an aviation fuel surcharge for passengers. Reimposition of BAF will be carried out soon, according to a source.
CAB: No schedule
The price of domestic aviation oil increased to 1,030 yuan per ton on June 30. Airlines including Air China and China Southern Airlines submitted an application to reimpose the BAF to the National Development and Reform Commission and the General Administration of Civil Aviation of China (CAAC). The subsequent sudden decline of international oil prices has put the CAB in a tough spot over the BAF debate.
"BAF must be revoked again if the oil price falls," according to an industry source.
With the international oil price hovering around 70 dollars, this week may become a sensitive starting time for the imposition of BAF.
Relevant authorities told Guangzhou Daily the imposition of BAF will influence both the national economy and the costs to consumers, requiring careful consideration of all aspects.
"It is unrealistic to make a specific schedule at present."
Li Lei, an analyst for China Securities, told reporters that the total cost to domestic airlines will increase by 7 billion yuan after the increase in domestic oil prices. This means airlines must charge passengers an extra 35 yuan per person for BAF to offset the increased cost of aviation oil. The debate has affected stock prices for domestic carriers, with values increasing by up to eight percent yesterday.
Though BAF for domestic fares is still being debated, fuel surcharges have led to a cost increase of 50 to 200 yuan for international travelers.
The history of the Bunker Adjustment Factor
Imposition - Airlines began to charge BAF for international and domestic air routes in 2000.
Expiration - The BAF was cancelled in 2004 when CAAC issued a reform proposal of airline fares, allowing airlines to raise the cost of airline tickets by 25 percent.
Reimposition - BAF was reimposed in August 2005. The prices were increased 20 yuan to 40 yuan per 800 km of flight distance. The reimposition was set to expire on Dec 31, 2005.
Extension - The National Development and Reform Commission and CAAC extended BAF to Mar 31, 2006.
Increase The domestic BAF standards were increased three times between April 2007 and July 2008.
Reduction The CAAC set BAF back to its 2005 levels.
Cancellation BAF was canceled on Jan 4, 2009.
(China.org.cn by Yang Chao, July 28, 2009)
