Chinese carriers would now have the ability to set their own prices on over 300 different routes after the aviation regulator liberalized fees in what is considered to be a huge step towards the reform of the world’s fastest growing civil aviation market.
The Civil Aviation Administration of China disclosed that it would let airlines work out their own prices on domestic routes that have at least five carriers competing. Price increases of no more than 10% would be permitted for each travel season.
“Every one percent rise in the domestic ticket price system-wide boosts the Chinese airline sector’s earnings by 7 percent based on our estimates,” stated Corrine Png, the Singapore-based Chief Executive of transport research company, Crucial Perspective.
China Southern Airlines is most likely the biggest beneficiary as it had the largest domestic market share, she said.
China Southern shares surged by more than 6% for a new two-year high, while Air China jumped by more than 8% to a new high level since November 2010. China Eastern Airlines climbed more than 5%.
Beijing has vowed to let market forces to play a more conclusive role in its aviation industry to further enhance service quality and efficiency.
Beijing loosened airfare limitations in 2013 and two years later, permitted airlines to set ticket prices on 101 routes.
The new rules is applicable to at least another 306 routes, including the lucrative Beijing to Shanghai route, according to the document that was dated December 17 and released to the public by the regulator on its website.