CAAC price policy change signals shift to market-based approach: China Eastern

SHANGHAI (AFX-ASIA) - A decision by the Civil Aviation Administration of China to liberalise air ticket prices on seven domestic routes signals that the administration is shifting towards more market-based methods of managing the airline industry, China Eastern Airlines Co Ltd spokesman Song Dangyang said. The Shanghai Morning Post today reported that the CAAC will permit air ticket discounts of up to 40 pct on seven domestic air routes, with effect from either today or tomorrow. The report said this price liberalisation move precedes the liberalisation of all domestic air ticket prices, adding that the CAAC's ticket price policy is expected to undergo a major changefrom end-March. The seven routes are Shanghai-Guangzhou, Shanghai-Shenzhen, Shanghai-Chongqing, Beijing-Guangzhou, Beijing-Shenzhen, Guangzhou-Kunming and Shenzhen-Chengdu, it said. An official in the CAAC price department confirmed the price liberalisation on seven routes. Song noted that the CAAC has periodically wavered between periods of tight control over ticket prices and periods of relativeliberalisation. He said the price liberalisation on seven routes, and expectations of further liberalisation, represent a shift towards more market-based methods for managing prices, but added that the administration is likely to retain some restrictions to prevent "illegal competition" betweenairlines. As a large airline, China Eastern Airlines is ready to compete under a more liberal pricing regime, he said, although he added that price competition from smaller airlines is likely to be strong, given that many of the smaller airlines are subsidised by their controlling local authorities. At 10:35 am, China Eastern Airlines A-share was down 0.01 yuan at 5.74.

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