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Cargo Fuel Surcharge
Since the temporary suspension of fuel surcharges in early 2016, CAD had been monitoring the movements of fuel prices and reviewing the regulation on fuel surcharges and had engaged a consultant to conduct a consultancy study on the regulation of fuel surcharges. The initial findings of the consultancy study released in early 2017 concluded that there was a global trend of liberalization of fuel surcharges to enhance competition and recommended that the CAD take a similar approach to fuel surcharge regulation. CAD subsequently conducted a further review on the way forward for fuel surcharge regulation in the long run. Pending the results of the further review and considering that the oil price had greatly increased by almost 80% from January 2016 to January 2017, which greatly impacted on the aviation industry, particularly the air cargo market which largely operates on a long-term contract basis and in response to the concerns of the industry, CAD in March 2017 agreed to implement a time-limited arrangement of allowing airlines to levy cargo fuel surcharge based on the Cargo Fuel Surcharge Mechanism for flights originating from Hong Kong from April 2017 to end-2019.
In the light of the challenges faced by the cargo industry in implementing the new cargo security screening requirements by mid-2021, coupled with the prolonged trade activities amongst major economic powers that created great uncertainty to the normalcy conducive to the development of a healthy and competitive transportation environment for air cargo, the CAD considered that on an exceptional and one-off basis, there is merit to extend the current regulated cargo fuel surcharge regime to help the cargo industry to gear up for the full implementation of the new screening requirements. Taking into account the opinions from various stakeholders, the CAD announced in July 2019 that the time-limited arrangement for airlines to levy cargo fuel surcharge based on the current Cargo Fuel Surcharge Mechanism of the CAD for flights originating from Hong Kong will be extended to the end of June 2022 from end 2019. The CAD maintains its outlook to the progressive liberalization of tariffs to promote and ensure competition in air transportation.
Calculation of Cargo Fuel Surcharge is based on the following formula:
Cargo Fuel Surcharge =
Cargo Fuel Surcharge Table (updated on 7 January 2020)
Airlines are allowed to charge cargo fuel surcharges according to the Cargo Fuel Surcharge Table with reference to the respective Brent Oil Price range for a given month. The cargo fuel surcharge levels for short-haul and long-haul shown in the Table are the maximum levels only. Airlines may levy a lower cargo fuel surcharge or not to levy any such surcharge at all based on their own marketing strategies and operations.
Around the middle of each month (N), the Prevailing Oil Price and the corresponding maximum cargo fuel surcharge levels that would be applicable for the following month (N+1) will be published on CAD website. The Prevailing Oil Price will be determined by CAD based on the average daily Brent Oil Price of the preceding month (N-1).
Given the Prevailing Oil Price was US$54.87/Barrel for the month of February 2017, the maximum cargo fuel surcharge allowed for April 2017 would therefore work out to be HK$0.2/kg and HK$0.7/kg for short and long haul flights respectively.
The Prevailing Oil Price in February 2020 for determination of the cargo fuel surcharge for April 2020 is US$55.70/Barrel. The maximum levels of fuel surcharge for April 2020 will be decreased to HK$0.2/kg for short-haul flights and HK$0.7/kg for long-haul flights respectively.