Fuel surcharge to be cut on flights

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Fuel surcharge to be cut on flights

Due to plunging oil prices, fuel surcharges paid by customers on both domestic and international flights will be set to zero next month.

This is the first time domestic flights will be exempt from the surcharge since it was implemented in 2005. The fuel surcharge for international flights has already been zero for the past five months.

The surcharge amount is based on Singapore’s aircraft fuel price. The charge is exempted altogether if the Singapore price falls below 150 cents a gallon for international flights and 120 cents a gallon for domestic flights.

From Dec. 16 to Jan. 15, the reference period for the February surcharge, the average fuel price in Singapore was 101.03 cents per gallon, meaning all international and domestic flights next month will be exempt from fuel surcharges.

For international flights, the exemption only applies to national airliners operating routes that leave from Korea.

A route starting from abroad and coming into Korea will not be exempt from a fuel surcharge since airliners must follow the surcharge system of the departing country.

The surcharge for all domestic flights, which was set at 1,100 won (90 cents) per gallon in January, will be set to zero starting next month.

While the surcharge exemption may slash airliners’ earnings, ever-low oil prices are expected to offset the impact.

Higher demand following the price cut may even have a positive influence on the industry, according to insiders.

“The fuel surcharge system was implemented in July 2005 to prevent flight carriers from being burdened by soaring oil prices,” said a spokesman from Asiana Airlines, the nation’s second-largest airliner.

“Surging oil prices could be offset with earnings from fuel surcharges paid while slashed surcharges are offset with lower oil prices, meaning the profitability won’t change much even if the charge is set at zero.”

BY MOON HEE-CHUL [kim.jeehee@joongang.co.kr]

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