The long-awaited reform of domestic air fares could be finished by the middle of this year, giving air carriers more flexibility in setting prices. The State Development and Reform Commission, the country's most powerful body in charge of reform affairs, will hold a hearing to collect advice on its draft plan on April 24.
The commission will listen to ideas from 15 interested parties, including seven airline passengers from different parts of the country, four representatives of air carriers, two experts from China's Civil Aviation Institute and two consumer advocates.
They will discuss the commission's draft plan, which calls for the government to set a base ticket price for domestic routes and allow airlines to raise or lower the price within a set range in response to market demand.
Currently, the government sets ticket prices, but many airlines offer illegal discounts to attract customers.
Under the draft proposal, airlines would be allowed to raise prices by 25 percent or lower them by as much as 40 percent, according to a report on Shaanxi-based Chinese Business View Tuesday.
Officials with the commission declined to confirm the report, but said the draft plan will be posted on their Website today, and they will accept advice from consumers by e-mail.
Industry officials say the new rules will improve regulation of the industry, which has been hurt by fierce price wars despite the ban on discounting tickets.
"The spree of cutting prices hurts both air carriers and passengers," said Li Jingao, an official working with the Shanghai office of the Civil Aviation Administration of China. "Now the reform will be able to regulate the airline industry while leaving reasonable leeway for air carriers."
The maximum discount of 40 percent is based on average costs incurred by domestic airlines "in order to at least protect the state-owned assets from being lost,? said Li.
Domestic air carriers saw more passengers last year but lower average yield per passenger, which measures the profitability of each seat. China Eastern Airlines Co Ltd said its average yield per passenger was down 8.5 percent last year from 2001, while China Southern Airlines Co Ltd saw a 10 percent drop in its yield.
"The new rules will offer us more space and flexibility in operating our business. The practice will be closer to the market demand," said Luo Zhuping, board secretary for China Eastern. "We'll be able to raise prices in peak seasons to earn more money and cut prices during off-peak seasons."
Some industry analysts, however, don't think passengers will notice much difference if the draft is approved, as airlines are already offering discounts.
"Though forbidden by the government, carriers are already offering discounts," said Zhu Anping, an analyst with Shenyin & Wanguo Research and Consulting Co Ltd.
Luo, while speaking highly of the new reform by the government, also hopes for more flexibility in the future.
"From my personal opinion, I'm hoping for air ticket prices to be totally decided by carriers," said Luo.
Currently the prices of air fares for international routes are not regulated by the central government.
(eastday.com April 16, 2003)
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