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LCQ4: Issues related to the approval of the passenger fuel surcharges and agency commissions

     Following is a question by the Hon Paul Tse and a reply by the Secretary for Transport and Housing, Ms Eva Cheng, at the Legislative Council meeting today (November 30):


     On November 4, 2009, April 13, 2011 and June 15, 2011, I represented the affected general public and travel agents to raise questions to the Government, seeking explanation from it regarding what data and methods the Civil Aviation Department (CAD) uses for calculating, vetting and approving passenger fuel surcharges which are often criticised by the public as "quick in going up but slow in coming down".  In addition, I also requested the Government to explain based on what justifications and criteria CAD approved the applications by Air France and KLM Royal Dutch Airlines for not following the Air Services Agreements signed with the Hong Kong Government to unilaterally reduce to zero the commissions paid to travel agents in Hong Kong in respect of air tickets sold.  Although the wording of the questions already directly and explicitly requested the authorities to provide the justifications, data and calculating methods for vetting and approving the amounts, the Government ultimately did not provide the information requested in the questions.  Some of the passengers and travel agents who had previously relayed their views to me pointed out that the Government's responses were irrelevant and perfunctory.  In this connection, will the Government inform this Council:

(a) whether the Government has assessed if the various policy bureaux and government departments were not able to address the concerns raised by the public and the business sector in their replies to the questions raised by Members of this Council in the past, hence making the public feel that the Government had deliberately averted the problems or acted in a perfunctory manner, thereby leading to the stagnant relationship between the executive authorities and the legislature as well as undermining public confidence in the Government's governance; if it has, of the outcome of assessment; if it has not conducted such an assessment, the reasons for that, and whether it can assess right away and study if there is any room for improvement;

(b) of the polices, measures and codes of practice the Government has in place to ensure that the various policy bureaux and government departments will not reply or respond to Members' questions in a perfunctory manner; and  

(c) whether it will instruct CAD to follow up the aforesaid issues again, so as to respond to the reasonable questions raised by the public, the business sector and Members, as well as providing important data that are of public concern?



(a) and (b) A good relationship between the executive and the legislature enhances Government administration, facilitates implementation of policies and promotes the development of the society.  The Government respects the legislature's role in overseeing its work and reflecting the views of the public, and has actively co-ordinated with the legislature in delivering its duties.  In fact, the Government has, through its attendance at the various meetings regularly held at the Legislative Council, including Council Meetings, Panels, Subcommittees and Bills Committees, explained its policies, listened to the views of Members, provided replies to Members' questions and furnished Members with required information.

     To address the concerns of Members, policy Bureaux and Departments have been handling all the questions raised during Legislative Council meetings seriously and provided the required information.  If an official cannot provide the information requested by the Member, the administration will certainly explain in its reply the reasons for not being able to do so.  The Government will not avoid the problems or act in a perfunctory manner.

     In addition, all the replies provided by the Government at Legislative Council meetings are open records which are accessible by the general public.  This arrangement is highly transparent, which facilitates the public to monitor the work of the Government.

(c) With respect to Hon. Tse's enquiries about the issues related to the approval of the passenger fuel surcharges and agency commissions, I will now elaborate the relevant principles again.

     The air services between Hong Kong and other areas are governed by the bilateral air services agreements (ASAs) that Hong Kong has entered into with its aviation partners.  The purpose of the ASAs is to promote the development of air services between the respective areas.  The ASAs also provide for the principles, policies, regulatory framework and the specific operational arrangements and requirements concerning the provision of air services.

     According to ASAs, the tariffs to be charged by the airlines for air services, including the fares charged for the carriage of passengers, the rates charged for the carriage of cargo, the charges and conditions for services ancillary to the carriage, fuel surcharges, and the rate of commission paid to an agent in respect of air tickets sold for carriage on scheduled air services, shall be those approved by the aeronautical authorities of both Contracting Parties.  The ASAs also provide for the aeronautical authorities to approve tariffs at reasonable levels, with due regard to all relevant factors, including the airlines' operating costs and benefits to consumers.  Such requirements aim to prevent airlines of either Contracting Party from adopting such practices as dumping and discriminatory or predatory pricing, which would distort normal market operations and affect the provision of air services, to the extent of adversely affecting the interests of passengers.  As the aeronautical authority of Hong Kong, the Civil Aviation Department (CAD) is responsible for the implementation of the measures stipulated in the ASAs to promote healthy competition in the market and protect consumer interests.

     The fuel surcharges levied by the airlines are part of the aviation tariffs which allows airlines to partially recover the increase in operating costs due to fluctuations in aviation fuel prices.  CAD considers and approves fuel surcharge applications in accordance with the ASAs.  During the period from December 2010 to November 2011, CAD considered and approved fuel surcharge applications on a monthly basis, of which seven approvals involved upward adjustments to the fuel surcharges, three approvals involved downward adjustments, whereas two approvals maintained the surcharge at the same level.  This generally reflected the changes in the fuel prices over the same period.

     The commissions paid by airlines to travel agents are also part of the aviation tariffs.  CAD considers and approves applications in accordance with the ASAs.  With respect to the applications submitted by Air France and KLM Royal Dutch Airlines in August 2009 to reduce the rate of commission payable to travel agents, CAD approved the applications in accordance with the requirements stipulated in ASAs.  As mentioned earlier, it is CAD's responsibility to approve the tariffs charged by airlines on a reasonable basis to foster fair competition and protect consumer interests.  The commercial arrangements concerning the level of commissions should be negotiated and determined by the airlines and the travel agents in accordance with their commercial considerations.  This is not within the scope of the ASAs.  Therefore, the applications of the two airlines in question are not in breach of the respective ASAs.

     Regarding Hon. Tse's requests to CAD to provide detailed data used in the approval process of the fuel surcharges, except for those commercially sensitive information, the department in fact announces the results of the latest approved fuel surcharge levels on a monthly basis.  It also publishes the results on its web page for ease of reference of passengers.  

Ends/Wednesday, November 30, 2011
Issued at HKT 13:36


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