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China's aviation authority is going to relax its control over air fares charged by domestic carriers starting next month, a move which will allow airlines to float ticket prices within a broad range.
As of April 20, airlines will be allowed to raise ticket prices for domestic flights by up to 25 percent above a government recommended price. They will also be allowed to offer discounts of up to 45 percent of that price, the National Development and Reform Commission, a key government body which controls reform in China, announced yesterday.
The reform is necessary to solve some deep-rooted aviation sector problems including unreasonable pricing regimes, lack of a sound competition system, and outdated management tools, the commission said in a statement posted on its Website.
"Relaxing air fares will benefit carriers nationwide as they will enjoy freedom in building marketing strategies," said Li Jingao, an official with the Shanghai branch of the Civil Aviation Administration of China, the industry regulator.
"Under the regulation, I believe tickets with big discounts like 70 percent off or sometimes even 80 percent off won't exist," said Li.
Many industry analysts say that travelers won't see any big price changes due to the relaxed policy as most domestic airlines have been offering deep discounts on tickets for several years.
"Discounts are available now and the relaxed rules are close to the current discounting range of about 30 to 40 percent," said Zhu Anping, an industry analyst with Shenyin & Wanguo Research and Consulting Co Ltd, explaining that's why stock markets didn't react strongly to the news.
The biggest change for airlines is that they are allowed to raise prices according to market demand.
"Carriers will raise prices during peak seasons like the traditional Chinese Lunar New Year, when tickets are almost sold out on the busiest routes linking major cities like Shanghai, Beijing and Guangzhou," said Zhu Songyan, a marketing official with Air China.
Zhu said most travelers won't have to worry about price hikes outside of peak periods, and discounts will remain common.
The regulation also allows carriers with inter-provincial flights, or routes between nearby cities, more room to discount tickets so they can compete with train and bus services.
China used to regulate its air fare tightly and set prices for all routes. But an increase in the number of domestic carriers in the late 1990s triggered price wars that regulating bodies failed to control.
The new decision is the latest in a series of reforms introduced to bring market order to a domestic flight sector that expanded dramatically over the past decade as China's blistering economic growth spurred heightened domestic passenger demand.
(Shanghai Daily March 19, 2004)
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