Earlier this month, one could pay 500 yuan to fly from Beijing to Guangzhou. It was good news for travelers as the price was not much higher than train tickets. However, the move was banned just 4 days after travelers enjoyed the big discount of 30 percent.
The great discounts offered by all airlines began on the 8th this month. But travelers benefited for only 4 days before it was banned by the state aviation watch dog, the Civil Aviation Administration of China.
An industry insider said the big discount will result in money loses for airlines.
"If Air China sells 30 percent discount tickets and all tickets sold out, a Boeing 747 flight could lose 110 thousand yuan, which is unacceptable."
The insider stressed that there are hidden rules.
"So the rule is that every airline participates in the price setting process. The airline that breaks the rule and start the price war will be banned."
But economists see it differently. Fan Xincheng is a professor from the Zhongnan University of Economics and Law.
"We can see that the move is trying to perpetuate high costs, low efficiency airlines. It is indeed an industry with a monopoly."
The professor gives advice on how to regulate the aviation market.
"The CAAC should not interfere with price. It can set the top end price but not the lowest. The aviation administration should not be a player and referee at the same time. The Market should be the deciding force."
Fan Xincheng gives his idea how the airline ticket price should be decided.
I think each airline should give its airline ticket price, and then consumers can choose according to the price offered. Then reasonable market price will come out during the process."
Boeing says Chinese airlines will spend 183 billion us dollars on aircraft over the next 20 years.
The expert says though the Chinese aviation market is huge and has great potential, it is far from mature as it is still struggling with the premature government administration.
(CRIENGLISH.com August 19, 2005)
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