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The public hearing on the price adjustment scheme for domestic airlines, which was set to open in April but was delayed because of SARS, has been rescheduled for July 15.
One of the most sensitive issues for the industry right now, this price adjustment controversy has once again captured the public's attention.
The hearing itself is certainly welcome news, since it makes the pricing process more transparent. People can get access to more details of the new draft adjustment plan. This is a reflection of enhanced democracy in economic decision-making.
But we should not invest too much hope in the matter. We must bear in mind that a public price hearing is new in this country. Immature arrangements in the process of organizing the hearing may hinder its effectiveness as a balancing measure.
And it is not necessarily a decisive move in establishing the final pricing system. Despite heated debate between consumer representatives and industrial players, the proposed price plan can often go through, as previous hearings have indicated.
There have been two price hearings before -- one was for the telecom service rate in 2000, and the other involved railway ticket prices last year.
The first one was not "public." It was more like an off-the-record meeting than a public hearing.
The second one, which was attended by many visitors -- which shows progress -- did not avoid the fact that the price of railway tickets during peak seasons can be raised by about 30 percent.
This time, the proposed plan cuts the price from 0.94 yuan (11 US cents) per person per kilometer to 0.75 yuan (9 US cents) per person per kilometer. It permits up to a 40 percent downward adjustment and caps a 25 percent rise.
This will be progress compared with the current pricing mechanism in that aviation companies cannot have a floating price range to adjust fares in different seasons.
And the price cut does benefit consumers.
But problems remain. On which cost level is the new pricing system based? In the draft plan, the companies say that only a small part of the costs is incurred by managerial expenses, which is controllable. Many of the costs are uncontrollable, they claim.
Given their information disadvantage, consumer representatives cannot possibly have an insightful look at the true costs involved for these companies. This is proving to be a snag for market regulators.
It is a universal question facing regulators of a market that is not fully competitive. A public hearing certainly cannot give an answer. It is predicted that it will give the plan the green light.
Thus, the authorities in place should enact measures to introduce more competition into the domestic market. More competition may hopefully produce a more reasonable price level.
Late last year, the merger of nine big State-owned airlines into three aviation groups was completed.
The authorities should further open up the industry, introduce investors from both home and abroad and reform the monopolies on supporting industries.
(China Daily July 7, 2003)
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