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Following is the question by the Hon Fred Li and a written reply by the Secretary for Economic Development and Labour, Mr Stephen Ip, in the Legislative Council today (January 24):
Question:
Regarding the levy of fuel surcharges on passenger carriage by airline operators, will the Government inform this Council:
(a) of the respective numbers of times, since January 2005, for which airline operators were granted approval for collection of fuel surcharges on short-haul and long-haul flights, and the total amounts of surcharges collected since then;
(b) of the specific criteria adopted by the Civil Aviation Department for vetting and approving applications for extending the collection period of fuel surcharges, and the measures in place to prevent airline operators from obtaining profits in the event that their actual additional fuel expenditures are less than the revenue from the fuel surcharges;
(c) whether the levels of fuel surcharges approved in the past six months have been adjusted in line with the movements of aviation fuel prices in that period; if so, of the details; if not, the reasons for that; and
(d) whether it will temporarily stop granting approval for fuel surcharge applications or reduce the proposed amount of surcharges when granting such approval; if not, of the reasons for that?
Reply:
Madam President,
(a) The fuel surcharges levied on passengers by airline operators were adjusted on eleven occasions from January 2005 to January 2007, seven of which were upward and four of which downward adjustments. In the two years from January 2005 to December 2006, the total amount of surcharges collected by airline operators was about $12.4 billion, representing about half of the additional costs borne by the airlines for passenger carriage which were due to increased fuel prices over the same period.
(b) Fuel surcharge allows airline operators to partially recover the increase in operational cost due to aviation fuel fluctuations. In accordance with the existing bilateral air services agreements, airline operators should consider all relevant factors including their operating costs, the passenger interests and the tariffs charged by other operators on the same routes in determining their tariffs, and shall only levy the tariffs with the approval of the relevant aeronautical authorities. The Civil Aviation Department (CAD) will take into account changes in the prices of aviation fuel, the justifications provided by the airline operators and other relevant factors when approving fuel surcharge applications.
When approving fuel surcharges, CAD would see to it that the revenue so generated would not exceed the additional costs borne by the airline operators due to increased fuel prices during the corresponding period.
Given the fluctuation in oil prices, CAD only approves fuel surcharges to be levied on a short term basis, in general over a two-month period.
(c) When vetting fuel surcharge applications, CAD has all along made reference to changes in aviation fuel prices to determine the reasonable level of charges. In the six months from August 2006 to January 2007, CAD processed three rounds of fuel surcharge applications, resulting in a cumulative decrease in surcharge levels by 9%. According to information provided by CAD, at the international level, the average fuel surcharges levied in other places on major routes stood at about $260 (for short haul flights) and $560 (for long haul flights) per passenger, whereas the fuel surcharges by the major Mainland airlines operating to international destinations (other than Hong Kong) stood at about $310 (short haul) and $470 (long haul) per passenger. Against these figures, the fuel surcharges levied in Hong Kong on major routes as from February 2007, at $106 (short haul) and $438 (long haul), are at a reasonable level.
(d) As mentioned above, there have been occasions whereby the levels of fuel surcharge were adjusted downwards. CAD would continue to take into account changes in the prices of aviation fuel, the justifications provided by the airline operators and other relevant factors when it considers fuel surcharge applications.
Ends/Wednesday, January 24, 2007
Issued at HKT 15:22
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