China plans to cut jet fuel prices to aid airlines, consumers

[SINGAPORE] China is planning to lower wholesale aviation fuel prices as early as July, part of Beijing's pledge to reduce business costs in a slowing economy, said an oil industry executive and a spokeswoman with the Chinese aviation authority.

The cuts will apply to both ex-refinery prices and rates charged to airlines by China's dominant jet fuel distributor China National Aviation Fuel Group (CNAF), and could amount to a total annual savings to airlines of more than one billion yuan (S$199.3 million), said the industry executive on Thursday.

"This is part of the aviation authority's response to the (Chinese) Cabinet's call to help smaller businesses and consumers, as the economy is really slowing," said the executive, who declined to be named due to company policy.

The National Development & Reform Commission (NDRC) is expected to tweak a formula that has been used since 2011 to set the domestically produced aviation fuel prices charged by state oil refiners, said the executive.

Changes will also be made to a separate formula set by the Civil Aviation Administration of China (CAAC) that regulates fuel prices charged to airlines that fly international routes, he said.

The government will lower the fixed premiums previously set in the formulas, which are linked to prevailing Asian spot prices of jet fuel, as well as cut marketing and operational fees, said the executive.

The executive did not give any further details, and the NDRC did not respond to a faxed request for comment.

A CAAC spokeswoman said the price cuts will start in July including reductions to marketing and operational charges, but she gave no details on the changes to the pricing formulas.

Calls to the press office of CNAF, the dominant aviation fuel distributor, went unanswered.

The proposed price cuts come on top of CAAC's plan to halve the levy that airlines pay into the civil aviation development fund and will benefit China Eastern Airlines, Air China and other operators.

Singapore free-on-board spot jet fuel prices have so far this year gained nearly 30 per cent to about US$84.40 per barrel.

The industry executive said China's stimulus would likely help counter slowing growth in China's air traffic.

China's air passenger traffic in April rose 4.6 per cent from a year earlier, recovering slightly from March's 4.0 per cent growth, which marked the slowest gain in three years, data from the National Bureau of Statistics showed.

REUTERS