Research On Regulation And Competition In China's Airline Industry

Deepening the reform of monopoly industries to introduce competition mechanism is a key project of China's economic reforms for the current and nearfuture time.The regulation on airline industry which is regarded as a traditional natural monopoly industry is representative and typical among these industries.Based on the theory of government regulation, this paper focuses on regulation and competition issues in airline industry. To analyze status of China's airline industry and mechanism of deregulation on airline industry, empirical analysis and normative analysis, qualitative analysis and quantitative analysis, logic and history methods are used ,meanwhile, supported by case studies and game theory tools.The market structure of Airline industry acts in close coordination with deregulation on it. Empirical study shows that: regulation does not reduce the price level or improve consumer welfare significantly, and production and regulation have no significant correlation. The main reason is that price regulation is not corresponding to entry regulation. Moreover, regulatory institutions and industry share the same benefits.Therefore, in order to improve China's airline industrial efficiency and consumer welfare level, regulation on it should be relaxed. There is a positive correlation between the strength of natural monopoly and that of regulation,whch is based on mechanism analysis. The natural monopoly strength of airline industry is becoming weaker and weaker because of economic and technological changes and the impact of external demand. With potential competition in the industry and alternative competitition outside it, oligopoly competitive market structure characteristize it increasingly, so the intensity of its regulations should be weakened. The loss of enterprise efficiency and efficiency of resource allocation,and rent-seeking due to regulation on airline industry lead to"regulatory failure" .The drawbacks of regulation exposed increasingly. Therefore, in order to overcome these drawbacks, deregulation is rational choice.China's airline regulation is a systematic project, all aspects of regulatory policies should be coordinated, especially price regulation and entry regulation ,so as to avoid "price war" against the negative effects on airline industry. Administrative monopoly in China airline industry results in enormous cost. Moreover,administrative monopoly and natural monopoly mixed together, which results in administraive monopoly's concealment and greater harm. Therefore, we should regard abolishing administrative monopoly as prime objective of current China's deregulation prime objective.On the problem how to break administration monopoly,this paper suggests:put Anti-monopoly law into effect conscientiously, introduce competition mechanism to supply of flight line and industrial Upstream at first,so as to separate interest relation between government and enterprises.