International High Oil Prices: Korean Aviation Industry Hopes to Shorten Fuel Surcharge Reflection Period

According to Yonhap News Agency, the Korea Aviation Association held a "National Airlines Symposium in Response to the Middle East War" today, with 12 airlines including Korean Air participating. They decided to submit a policy support plan to the government to help overcome the crisis.

The association stated that the price of aviation fuel, which accounts for more than 30% of airline operating costs, has surged by about 147% after the Middle East war. At the same time, the rising exchange rate has further burdened airlines that pay maintenance fees in US dollars. Therefore, the association requested the exemption of tariffs and oil import surcharges on domestic aviation fuel until fuel prices return to pre-Middle East war levels.

According to the Customs Act, fuel used by airlines for domestic routes is subject to a 3% tax on crude oil prices, while international route fuel is tax-exempt.

The association also plans to request a shorter reflection period for fuel surcharges. Currently, international route fuel surcharges are calculated based on prices from the 16th of two months prior to the 15th of the previous month. For example, for tickets issued in May, international routes are based on prices from March 16th to April 15th. Domestic routes are based on the average price of Singapore aviation fuel (MOPS) two months prior.

However, the association stated that with daily increases in oil prices recently, it is difficult for actual ticket prices to reflect cost increases in a timely manner, leading to increased burdens on airlines.

The association believes that even if the Middle East war ends in the short term, high oil prices will continue for several months, and market stability will take time, which may further weaken the competitiveness of the national air transport industry. An association official said, "The surge in aviation fuel prices caused by the Middle East war is an act of force majeure. Without government support, it will be difficult for the industry to overcome the difficulties on its own." (Edited by: Chen Cheng-kung) 1150407