China eases grip on some domestic airfares, allows carriers to set cargo rates

BEIJING - China's aviation regulator has loosened its grip on passenger airfares for around 100 domestic routes as part of measures to further open up the country's aviation market.

Air China and its domestic rivals are allowed to set ticket prices as high as they want on 101 routes which are also served by high-speed railways and other ground transportation, the Civil Aviation Administration of China (CAAC) said on Monday.

The CAAC also said it had allowed airlines to set their domestic air cargo rates, which had been previously controlled by the government.

The latest changes are intend to "deepen airfare reform" and promote "sustainable and healthy development" of the country's airline industry, CAAC said.

The airfare policy change would enable airlines to hike their fares freely at any time, including peak travel seasons such as the upcoming Lunar New Year holidays in February.

"It now give airlines the freedom to hike prices as long as there is market demand," said Yu Nan, an industry analyst with Haitong Securities.

"Previously, they can only hike airfares by as much as 25 per cent based on the base rate set by the government."

In late 2013, CAAC relaxed airfare restrictions for the first time in nearly a decade, allowing Chinese airlines to set prices as low as they want on 31 domestic routes.

Before that, they were allowed to charge up to 25 per cent more or 45 per cent less than prices set by the regulator.

The routes covered by the latest airfare reform include the Dalian-to-Yantai, Fuzhou-to-Nanchang, Haikou-to-Nanjing routes.

Air China's shares in Shanghai closed 9.95 per cent higher on Monday, outperforming a 3.61 per cent rise in the benchmark index .

China Southern Airlines Co Ltd, China Eastern Airlines Corp Ltd and Hainan Airlines Co Ltd shares advanced between 6.43 and 8.53 per cent.

Analysts said the gains were mostly due to CAAC's fourth reduction in fuel surcharges since October 2014. The cut was effective from Monday.