Cathay Pacific Fuel Surcharge Increases Approved

Cathay Pacific Airways has been notified by the Civil Aviation Department of Hong Kong today that it is one of the airlines which has been granted approval to increase its passenger fuel surcharge.

In the case of Cathay Pacific, approval has been granted for an increase in the fuel surcharges for a two-month period effective from June 1, 2008 to US$21.90 (HK$171) for short-haul services in South and North East Asia and US$91 (HK$710) for long-haul services.

The current surcharges are US$16 (HK$125) for short-haul services and US$66.4 (HK$518) for long-haul services. Even with the latest increase, the airline estimates that they cover only less than half of the increased cost of fuel.

Cathay Pacific Chief Executive Tony Tyler said: "The approved increases reflect the soaring jet fuel prices that are posing an enormous challenge to the aviation industry. The situation is having a very serious financial impact on airlines worldwide and we are no exception.

"Jet fuel prices have reached an unprecedented level and the situation is likely to get worse before it gets better.

"The price of fuel has doubled since last year and has risen by 55% this year alone. At current prices, it costs us US$360,000 in fuel alone to fly a 747-400 to London and back."

Mr. Tyler noted that jet fuel prices now account for some 40% of the airline's net operating costs, compared with 30% last year.

Most importantly, the difference between jet fuel and crude oil prices had widened dramatically in recent months because of additional refinery costs, limited refinery capacity and persistent demand, he added.

Cathay Pacific regrets the need to impose this further surcharge on passengers, but the airline reiterates that it is important to the sustainability of its business that the fuel surcharge level keeps pace with the increase in fuel prices.

Aviation is an international business and fuel surcharge is commonly adopted by airlines worldwide to partially recover the increase in their operating costs. It has been recognized as the simplest, most transparent and effective way to reflect the fluctuations in jet fuel prices.

The airline pointed out that even with the new surcharges, Cathay Pacific still lags far behind the surcharges imposed by other international airlines, most of which do not have to seek Government approval for their surcharges. Most major airlines currently levy fuel surcharges of some US$120 to US$150 per sector on their long haul services, some even at US$180 level.

Cathay Pacific's policy is to balance the interests of our customers with the need to run a cost efficient airline in the interests of our staff and shareholders. The airline has taken a range of cost efficiency measures to tackle the increased costs, and will continue to develop ways of countering them.