Chinese airlines get more freedom in pricing from regulator
The liberalization measures have been extended to more domestic routes, especially those facing direct competition from high-speed rail.
China removed the caps on full fares and airlines can decide on prices for routes as long as they are served by at least five carriers, according to a joint statement by the Civil Aviation Administration of China and the National Development and Reform Commission on January 5. Any planned increments for fares should be within 10%.
China has been gradually liberalizing domestic flight fares over the past few years. The government sets the maximum fare for domestic flights, allowing airlines to sell at discounts. It has been removing such caps on certain routes, and giving airlines the freedom to raise price within a certain range.
Over the years, the liberalization measures have been extended to more domestic routes, especially those facing direct competition from high-speed rail. However, some of the most profitable routes, such as Beijing to Shanghai, have been subject to the government pricing caps until now.
The new rule allowing market-based pricing for domestic flights is the latest policy seen boosting Chinese carriers’ earnings after years of international expansion dented passenger yields, a key metric of profitability. In 2013, airlines had pricing freedom only over 31 routes and Friday’s decision extends that to more than 306. The CAAC had earlier pledged to have a market-based pricing mechanism in place for air tickets before 2020.
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