China eases state control of flight prices
The Civil Aviation Administration of China together with the National Development and Reform Commission announced further easing state control over ticket pricing for air travel. The liberalization had a positive impact on share prices of the major Chinese carriers.
The liberalization gives airlines more liberty to set ticket prices for domestic flights on approximately 300 routes in China. In particular, the caps are removed on full fares and carriers are given more control on pricing for the routes that are served by no less than five airlines, Bloomberg reports. Nevertheless, fare increases have to remain under 10%.
In China, ticket prices for domestic flights are controlled by the state through two authority bodies ─ The Civil Aviation Administration of China and the National Development and Reform Commission. They set the fare cap, allowing airlines to sell tickets at prices under it. As Bloomberg notices, China has been liberalizing this policy and removing caps on certain domestic routes for the past few years.
The changes, together with other contributing factors had a positive impact on airline shares. On January 8, 2018 the shares of carriers including Air China, Cathay Pacific (which is a major shareholder of Air China), China Southern Airlines (ZNH) , and China Eastern Airlines (CIAH) (CEA) saw an increase by up to 11% in Hong Kong and Shanghai.
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