Fuel surcharges imposed on domestic flights has been extended, according to a circular issued recently by the General Administration of Civil Aviation of China (CAAC), the industry watchdog.

The original deadline was December 31, 2005.

Tickets for flights in 2006 issued before this new announcement was made are exempt.

To address the issue of rising jet fuel prices, domestic carriers were allowed to introduce fuel surcharges on internal flights beginning August 1 until the end of the year. This was announced in a document jointly released by the CAAC and the National Development and Reform Commission (NDRC) at the end of July.

An additional 20 yuan (US$2.46) will be charged to ticket prices for distances less than 800 kilometers, or 40 yuan (US$4.93) for distances 800 kilometers or more.

Sources with the CAAC said the CAAC and the NDRC will continue to work together on the surcharge policy.

A CAAC insider said that it was the newly established China Aviation Transportation Association that made the application to extend the surcharge policy.

The association was set up on September 26. Its members include Air China, China Eastern, and China Southern Airlines.

Wei Zhenzhong, secretary-general of the association, confirmed that it had made the application.

However, industry analysts believe that the surcharge extension will not significantly change the balance sheets of domestic airlines.

Li Li, an analyst from Beijing Aviation Securities Company, said the surcharge does little to reduce operation costs mainly because of discounted airfares that airlines offer.

Li said cut-throat competition on domestic routes forces carriers to offer heavily discounted tickets to lure customers, especially during off-peak periods. Discounts offered can be as much as 70 percent of CAAC list prices.

(China.org.cn by Wang Zhiyong November 26, 2005)