Source: The Standard Author: Timothy Chui 07/04/2008
Subject Concerned: Government Opinion Airlines Aviation Fuel
An academic has described the Hong Kong Civil Aviation Department's (CAD) method of setting fuel surcharges in its bi-monthly reviews as a "black box", an enigma to even the most astute outside observers.
Aviation policy and research center associate director Law Cheung-kwok of the Chinese University of Hong Kong also called for more transparency and flexibility in the territory's mechanism for pegging fuel subsidies. "We really don't know what kind of parameters are used by the government," he said.
But according to the CAD, changes in aviation fuel prices and justifications provided by airlines as well as other factors are considered.
Law said reducing the bi-monthly application time to every month would allow greater flexibility for airlines struggling with record setting oil prices to strike better balances with operating costs.
The current fuel surcharge agreement between the CAD and the carriers is set to expire on July 31.
With 20 airlines having gone under in the first half, the International Air Transport Association (IATA) said projections for the rest of the year are equally grim.
Among the early victims is the territory's own Oasis Hong Kong Airlines.
With the industry's global fuel costs set at US$176 billion (HK$1.37 trillion) based on US$106.50 a barrel, crude's breakthrough price of US$146 a barrel on July 3 would put the annual costs closer to US$242 billion.
"For every dollar the price of fuel increases, our costs go up by US$1.6 billion," IATA director general Giovanni Bisignani said.
With conservative projections of US$2.3-US$ 6.1 billion in net losses for the year, the international body is calling for lifting restrictions on cross-border consolidation and restructuring to ease pressures.
The IATA's June financial forecast said rising jet fuel prices coupled with a sharp downturn in business travel and falling US consumer confidence meant breaking even this year would be a rarity.