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Price floor to be set for air tickets

By Xin Dingding (China Daily)
Updated: 2009-01-14 07:33

The civil aviation authority has ordered airlines not to compete with each other by selling tickets at lower than cost price in a bid to end a price war, the National Business Daily reported on Tuesday.

The Civil Aviation Administration of China (CAAC) will set a floor price for seats on 699 flights, and airlines have been ordered not to sell tickets below that figure, the newspaper quoted the China Air Transport Association (CATA) as saying.

The names of airlines that offer passengers tickets at less than the CAAC minimum will be made public every 15 days, and they could face punishments, such as having routes canceled, the report said.

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Li Aiqing, a researcher with the CATA, confirmed the report to China Daily on Tuesday, saying it is part of the CAAC's measures to prevent "malicious competition".

In the past few months, airlines have given big discounts to attract customers in the sluggish market. In the first 11 months of last year, domestic airlines lost more than 7 billion yuan ($1 billion).

Discounts of 70 to 80 percent have been common over recent months.

But the CAAC wants this to stop.

"Airlines use low prices to attract the necessary numbers of passengers to stop their routes from being canceled by the CAAC," Li said.

The airlines' price war continued last week when China Eastern Airlines gave a big discount on flights from Chengdu to Shanghai, which provoked counterattacks from other airlines that asked ticket agents to stop selling China Eastern's tickets.

Some insiders have implied that China Eastern used funds injected by the government to subsidize its losses on ticket sales.

Wang Ronghua, director of the transport department of the CAAC, said on Tuesday during an online interview that the government had injected several billion yuan into China Eastern to maintain its daily operations, but not so it could cut ticket prices.

"We don't want airlines to cut prices too much," he said without elaborating.

Li said that regulating market prices is one of the CAAC's 10 measures to fight the global financial crisis.

"By gathering information about various airlines' ticket prices and booking rates, the authority can better know if there is need for airlines to buy more aircraft and expand their fleets," she said.

She also said that if the regulation is implemented, passengers will no longer be able to get discounts of 70 to 80 percent.

According to a regulation issued by the National Development and Reform Commission and the CAAC in 2004, airlines should not sell tickets at less than 45 percent of the nominal price, she said.

However, travelers are against the price floor.

"At the moment, it's cheaper to fly home than it is to go by train. I can't see why such a good thing has to be taken away," Beijinger Xu Lan said.

An anonymous netizen expressed support for the CAAC's freeze on discounts, "But (the authority) must ensure the floor price is the lowest possible.

"We don't want to pay extra just to fund some senior manager's salary," the person said.