South Korea may raise air fuel surcharges and domestic power prices, adding further pressure to accelerating inflation, even as Asia's fourth-largest economy slows.
So far South Korea's efforts have been centered on softening the blow of oil prices for consumers by delaying utility price increases and cutting import tariffs to minimize the impact of soaring global food and energy prices.
"We are considering requests by airlines (to raise fuel surcharges) and the decision is likely to be announced by mid-June as a part of overall counter-measures against rising energy prices," an official at the ministry told Reuters.
The ministry official said Korean Air and Asiana had requested earlier in May that the government raise the maximum fuel surcharge they can impose on long-distance flights as oil prices continue their rush to fresh record highs.
Oil prices, which have quadrupled in the past five years and hit a record of just over USD$135 last week, were trading at around USD$128 on Wednesday.
They have been rising inversely to the dollar amid a fever of speculative trading and concerns over long-term supply as China and India's economic growth continue.
Currently Korean carriers charge USD$140 in fuel surcharges for one-way long distance international flight, up from USD$52 late last year.
Airline shares were sharply higher on expectations of a rise in fuel surcharges, with shares in Korean Air and its rival Asiana both up.
"To fully reflect the cost pressure, fuel surcharges have to triple... but then the inflationary pressure will be too high," a Korean Air spokesman said.
"So we've asked the government to allow us to raise fuel surcharges by at least one third of the overall oil price increase, and I believe the government is fully aware of the situation."
Korean Air, which is also the world's largest air cargo operator, said this week it would suspend five routes with China between June and July, reduce traffic on other routes and keep cargo schedules flexible to minimize the impact of higher oil prices.
