Tue, Jun 24, 2008 - Page 12 News List

China Southern Airlines balks at cross-strait route

By Irene Shen  /  BLOOMBERG

China Southern Airlines Co (中國南方航空), set to become the first Chinese carrier to fly nonstop to Taiwan, said that routing services via Hong Kong airspace will lead to longer flights, squandered fuel and higher fares.

“It’s unreasonable and a huge waste of resources and passengers’ time,” company chairman Liu Shaoyong (劉紹勇), who will pilot the first flight, said in an interview yesterday. “This must be changed as soon as possible.”

Fares for Shanghai and Taipei trips will be twice the price they could be because of the diversion, which will add an extra 90 minutes to the length of a flight, according to China Southern. The services, due to start on July 4, will have to make the detour because of Taiwanese security concerns governing the airspace in the 150km-wide Taiwan Strait.

“Nonstop flights between the mainland and Taiwan will be very profitable if they can be flown direct,” said Li Lei (李磊), an analyst at China Securities Co (中信建投證券) in Beijing. “The fare for the flights is international, while the distance is domestic.”

China Southern, like carriers worldwide, is struggling to cope with surging fuel costs. China raised the price of jet fuel 25 percent from last Friday, adding about 15 billion yuan (US$2.2 billion) a year to domestic carriers’ operating costs.

Fuel will account for more than 40 percent of China Southern’s operating costs this year based on current fuel prices, Liu said. That compares with 35 percent last year.

The airline predicted that a rebound in traffic in the fourth quarter would enable it to post a full-year profit, notwithstanding higher fuel costs and slower travel demand caused by surging inflation, natural disasters and a stock market slump.

The carrier is also cutting services, optimizing routes and reducing waste on flights to cut fuel consumption. It has also applied to raise surcharges on domestic routes.

“We’ll do everything we can to pass this difficult time,” which is the worst period for Chinese carriers since the SARS outbreak in 2003, Liu said.

China’s airlines would need a 70 yuan increase in surcharges to offset the increase in fuel prices announced last week, Li said. Beijing would be more likely to approve an extra 50 yuan, he said.

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