Air carriers may hike fuel surcharges once more

Taiwan-based air carriers are considering increasing their fuel surcharges to customers in the face of mounting operating costs brought about by record oil prices.

Both China Airlines (CAL, 華航) and EVA Airways Corp (長榮) said that they will not raise prices immediately, but must consider it an option given the rising costs of oil. Oil hit of just under US$45 a barrel a few days ago.

According to a CAL spokesman, the airline does not intend to raise its existing fuel surcharges immediately but will continue to gauge the situation.

An EVA executive said that the carrier will make moves to reflect its rising production costs should international oil prices jump to a level exceeding EVA's limits.

Starting from July 1, CAL, EVA and four other Taiwan-based airlines imposed a fuel surcharge ranging from US$5 to US$13 for each travel section for three months in the face of soaring oil prices.

The carriers promised that they would rescind the fuel surcharges when the price fell back to US$36 per barrel.

The rising oil prices have forced Taiwanese carriers to worry about their future earnings prospects, in particular for the third quarter.

Although passengers can share part of their financial burden through fuel surcharges, aviation companies said that the price hikes have not fully reflected their operating costs.

Despite uncertainties surrounding oil prices that might erode the airlines' earnings, as market watchers have predicted, CAL and EVA are still upbeat on making their profit targets for the whole of this year, thanks to their good business in the first six months.

CAL forecast that its full-year business revenue would reach NT$89.074 billion (US$2.62 billion) for this year, with an estimated after-tax profit of NT$3.04 billion.

The nation's largest carrier is confident of meeting its full-year profit forecast, CAL president Philip Wei (魏幸雄) said, basing his prediction on the company's damage-control measures to hedge against rising oil prices. The company has saved at least NT$800 million in operating costs in the first half of the year.

EVA has set its business revenue target for the year at NT$76.778 billion, with an after-tax estimate at NT$2.784 billion. The airlines is expected to turn a first-half profit of NT$1 billion.

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