CAAC Domestic Fare Reformation Strategy Study

Civil aviation transportation industry has been developing rapidly in our country since the reform and opening-up policy is carried out with the market size expanded continuously, passenger composition changed greatly and the market competition becoming more and more fierce. The management on the civil transportation fare has experienced a repetitive discovery process of strict government control and loosen control. The transportation fare reform has caused positive effect on the lasting development of civil transportation industry. Due to the changes of the macro market condition and the market demand, the civil transportation fare system of our country is formed. The deeper level problems in the aspect of system and mechanism is gradually shown. Namely, the civil industry is at low market oriented level, the airlines is not yet the main factor of the market, the company rectification system which is based on property reformation is not realized, the fare system is not reasonable, the formation of the fare system is unitary and is not suitable for the demand of market segments and various passenger demands, the management power is relatively centralized, the basic function of the market resource allocation is not fully exerted, the civil aviation transportation fare management regulations and market competition rules are not perfect the means of management is backward and the market orders are not regulated.The target of Chinese's civil air transportation fare reformation is to achieve market oriented fare management. In year 2004, considering the factors of social average cost of civil air transportation, market supply and demand, social support capability etc, the State Planning Committee together with CAAC, defined the basic fare and floating range for the air transportation of passenger and cargo. The public fare given by the airlines can float in the range defined by the government. The floatation of the fare depends on the season, the time to buy the ticket, number of passengers, flight schedule and aircraft type etc. which gives more autonomy to the airlines. However, as the floatation is limited to certain range, the air transportation enterprise has not yet got full freedom on pricing, the market competition on price is not enough. From the statutory point of view, air transportation enterprise is still under the protection of the government. With the deepening of reformation, the government and the enterprise will act its own character. As the real main body of the market, the government will give the pricing right to the enterprise, the enterprise then can adjust its pricing according to the market demand and production cost and find a best point between traffic amount and fare, thus to maximize the profit. Therefore, the final target of our fare management reformation is to establish the market oriented enterprise pricing while the government is exercising its supervising function, this is the only direction and goal of our civil air transportation fare reformation strategy.