China Southern Airlines is seeking to sell four of its widebody Boeing (BA) 777-200 medium-range aircraft according to a tender invitation posted on the carrier’s Web site this week.

The four 777s it plans to phase out are the original short-range versions, which joined China Southern’s fleet between 1995 and 2000.

When new, the list prices of these aircraft were around $115 million to $143 million in the mid-1990s.

China Southern, which was China’s first airline to operate the 777s, didn’t say why it wants to retire the aircraft given their relatively young age. Passenger aircraft can remain in service for over 20 years.

China Southern said in April it decided to lease eight Airbus aircraft it had on order instead of buying them, to help the company reduce its ‘tremendous’ need for capital and relieve the pressure on operations caused by a high asset-liability ratio.

China Southern is China’s biggest airline by fleet size. At the end of 2007, the carrier had a fleet of 332 aircraft.
Source: CNN Money

Chinese airlines said the current increase in jet fuel surcharges was not expected to bring much benefit for them.

CAAC has allowed Chinese airlines to increase surcharges to:

RMB80 (about $11.66) from RMB60 for domestic flights of 800 km or less.
RMB150 (about $22) for domestic flights longer than 800 km.

This was the fourth time that the Chinese aviation regulator has raised surcharges since August, 2005, and the second time within eight months.

Luo Zhuping, a director of China Eastern, one of the country’s major carriers, was quoted by the Guangzhou Daily as saying, ‘There is not sufficient air traffic demand now. Despite the rise in fuel surcharges, airlines will have to make more discounts in order to compete for passengers.’

Wen Shuang, of a tourism company based in South China’s Guangdong Province, said the increase in jet fuel surcharges was not expected to cause notable fluctuations to air ticket prices for tourists. He said, ‘The fuel surcharges rise, but air tickets are declining.‘

Liu Shaoyong, chairman of China Southern Airlines, noted that jet fuel costs account for more than 40% of China Southern’s total cost.

The airlines’ operation cost increased by RMB15 billion a year because of oil price rises.
Source: China View

Air Canada has slashed its Vancouver-to-Beijing/Shanghai service from 14 flights a week to seven as the airline cuts costs in response to record fuel prices. From October 26, it will fly from Vancouver to Beijing three times a week and from Vancouver to Shanghai four times. It currently offers a daily service to both Chinese cities.

Canada is still trying to nail down an Approved Destination Status deal with China, which would allow more Chinese residents to travel to this country. Even without that status, China remains a vital market for British Columbia

Last year more than 91,000 Chinese residents visited thereputting it ahead of other international markets like Germany, Taiwan and Hong Kong. The average Chinese visitor in 2006 spent more than $2,800.

The airline announced last month it would cut its system capacity by 7% and shed up to 2,000 jobs to become more efficient as fuel costs skyrocket.

University of B.C. associate professor Marc-David Seidel doubts the cutbacks will have a huge impact on travel between Canada and China, noting Air China and China Eastern Airlines still offer regular services from Vancouver to Beijing and Shanghai.
Source: The Vancouver Sun

China Southern Airlines, the nation’s largest carrier by fleet size, has applied for an increase in fuel surcharge to offset expected losses resulting from the recent nationwide fuel price hike.

China Southern’s general manager Liu Shaoyong told the Beijing Times that the airlines asked to raise the surcharge ‘by a margin reflecting the current fuel price level.’ He did not give any figures.

Analysts said the fuel price increase is a problem as it raises their largest cost component at a time when domestic traffic sees some weakening. They say the carriers would need around a RMB70 increase in surcharge to offset the hike in domestic fuel prices.

When the government raised the price of jet fuel by 25% it added about RMB15 billion a year to the domestic carriers’ operating costs.

A China Southern spokesperson confirmed the airline has applied to the National Development and Reform Commission for a fuel surcharge increase but has yet to obtain approval.

An Air China spokesperson, meantime, said ‘it is very likely that if the authority allows upward adjustment of fuel surcharge [to CSA], it’s a green light for peers as well.’ Passengers currently pay a fuel surcharge of RMB60 on flights of up to 800 kilometers and RMB100 on flights beyond that.
Source: The Standard

China’s National Aviation Fuel Holding (CNAF), the country’s near-monopoly jet fuel distributor, is now charging domestic airlines about 15% more.

TheRMB900 per tonne hike, pending final government approval, follows a surprise increase in ex-refinery jet fuel prices of RMB1,500 per tonne from June 20.

This is the biggest quarterly rise in the last two years.

Ex-refinery prices — rates at which refineries sell to CNAF — are regulated by Beijing in a way similar to those of gasoline and diesel.

Although China is somewhat protected from world trends the soaring price of oil — now over $140 a barrel — has forced this action.

What does this mean for China’s airlines? They have to recoup the price rises one way or another.

Alternatives are:

Charging the passengers more by way of the fuel surcharge. Regulators have approved a higher surchage of US$11.67, up from US$8.75, for flights of 800 km or less, and US$21.87, up from US$14.58, for longer distances. The surcharges will only cover about 66% of the airlines’ increased fuel costs.

The air transport industry has forecast a loss of US$2.3 billion this year if crude oil averages US$107 a barrel. Oil prices rose to about US$143 a barrel yesterday.

And fare increases reduces the number of people wanting to fly. It forces businesses to look at alternative ways of communicating than face to face. As prices go up, passenger numbers, at least for a short period, go down.
Using smaller aircraft. Which works but aircraft ordering takes years not weeks or days. This is only a long term solution.
Cutting out unprofitable routes. This will happen.

In the short term this price rise is going to seriously affect the profits of China’s aviation. In the long term it is seriously going to affect its growth.
Source: Reuters