China relaxes airfare restrictions

For the first time in nearly a decade, China's aviation regulator has relaxed airfare restrictions by allowing airlines to set prices as low as they want on 31 domestic routes.

The airfare reform is the first since 2004 when carriers such as Air China, China Southern Airlines and China Eastern Airlines were allowed to set prices on most routes within a specified band.

The change applies to 31 routes including Beijing-to-Nanjing and Shanghai-to- Tianjin, the Civil Aviation Administration of China (CAAC) said on its website.

Since 2004, airlines have been permitted to charge up to 25 per cent more or 45 per cent less than prices set by the regulator. Removing the price floor is unlikely to have a major impact on the profitability of domestic carriers, which have been struggling as the economy slows, said Haitong Securities analyst Yu Nan.

Airlines frequently lower prices by as much as 80 per cent, and CAAC often threatens fines that it never imposes, according to industry insiders.

The reform could help carriers better compete with high-speed railways, which offer cheaper tickets, though many airlines have already lowered prices on the 31 routes.

This article was published by the Special Projects Unit, Marketing Division, SPH.