Representatives from four Chinese airlines are bargaining with the China Aviation Oil Holding Company (CAOHC), the country's major aviation oil supplier, over the price of aviation fuel, the Shanghai Securities News reported Wednesday.

 

Traditionally China's aviation oil price is decided by the government, while air companies have no bargain right in this area.

 

To introduce a more flexible system against the backdrop of international fuel price hike, the General Administration of Civil Aviation of China promulgated a reform draft on aviation oil selling price, which took effect from April 1, 2006, the newspaper said.

 

According to the reform plan, Chinese airlines now can bargain with the CAOHC over aviation fuel price. Commonly, the CAOHC buys aviation oil from various sources and then sells it to Chinese airlines.

 

Before April 1, the aviation oil price gap for CAOHC's purchase and resale was fixed at 480 yuan (US$60) per ton, but now it can fluctuate within a range of 8 percent, the newspaper said.

 

Chinese airline companies now can negotiate with the CAOHC over this price gap on the basis of market supply-demand relationship and local oil supply cost, it said.

 

Immediately after the regulation was enacted, four major Chinese airlines including Eastern Airlines, Air China, Southern Airlines and Shanghai Airlines sent their representatives to talk with the CAOHC in Shanghai over the price gap that may fluctuate at upmost range of 8 percent.

 

"As air companies, we hope the fuel price could be as low as possible," Luo Weide, finance manager with the Eastern Airlines told the newspaper.

 

During the talks, the four air companies expressed their hope that the price gap could be shrunken in the off-season, but the CAOHC refused to budge and expressed wish that the price gap could be enlarged.

 

Although the first price negotiation between Chinese airlines and its major fuel supplier ended with no progress, the Eastern Airlines will continue to talk with the CAOHC over the fuel price in the future, Luo said.

 

From 1990 to 2005, China's aviation oil consumption had been growing at an annual rate of 14.8 percent on average, together with the two-digit yearly increase of its domestic aviation market.

 

As the aviation oil price has been rising remarkably in the international market in recent years, Chinese airlines are witnessing their fuel cost soaring and thus facing severe challenges in this regard.

 

China consumed about 9.3 million tons of aviation fuel in 2005, hitting a record high in history.

 

(Xinhua News Agency April 13, 2006)