The Chinese government cut the domestic fuel price 32% to CNY5,050 ($736.49) per ton from CNY7,450, effective last Friday, marking the sixth time this year Beijing has adjusted the domestic price.
Because of the way in which fuel prices are managed by the government, Chinese airlines have not reaped the immediate benefit of the collapse in oil prices. Fuel expense currently accounts for 40%-50% of Chinese carriers' total operating expenses.
According to ATWOnline, China Southern Airlines is expected to benefit most from the new cut as it has the largest number of domestic routes, comprising 80% of its total. According to Shenyin Wanguo Securities Aviation Analyst Li Shurong, CZ will save about CNY5.8 billion in fuel costs annually.
China Eastern Airlines is expected to save CNY3 billion while Air China can save CNY3.7 billion as its domestic routes account for only 50% of its total. CAAC also cut fuel surcharges on domestic routes by a large margin.