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Tri-party Price Hearing Focuses on Airfares
Representatives from a wide range of interest groups, including the authorities, the aviation industry and the general public, took part in a public hearing on airfares yesterday in Beijing, the second such nationwide price hearing in China.

Consumer representatives called for further reductions in airfares, while aviation industry insiders hoped they might enjoy more freedom in deciding ticket prices.

Fifteen delegates representing consumers and aviation industry yesterday expressed a range of views at the hearing, organized by the National Development and Reform Commission (NDRC), the country's top pricing authority.

Consumer representatives urged a lower benchmark price, more discounts and careful consideration to special or middle and low-income groups such as teachers, students and retired people.

The two-part hearing, which lasted for five hours, became a platform for aviation industry representatives to come up with their requirements for more freedom to decide on the prices of air tickets. The item was included as one of 13 commodity and service items of special importance to people's lives and national security that are still under the charge of the State Council's pricing authorities and related departments.

The NDRC will continue to have a decisive say in the pricing mechanism used for the aviation industry after giving consideration to public input.

The newly unveiled pricing scheme by the commission has allowed airlines to raise ticket prices by a maximum of 25 per cent or cut them by up to 40 per cent. The benchmark price for every passenger is 0.75 yuan (US$0.09) per kilometer.

The commission said that, in the market-tailored pricing mechanism of domestic airfares, it has given full consideration to the interest of both consumers and aviation industry, which employed about 170,000 people.

Ren Huiying, a consumer delegate from Beijing, said that more room remains for further reduction in the benchmark price.

"After careful investigation, I believed the pricing authorities should readjust the benchmark price, which was set in 1997,'' Ren stated in his testimony at the hearing, which attracted about 200 journalists from home and abroad.

Based his argument on the fact that market situation has changed, Ren suggested a benchmark price of lower than 0.65 yuan (US$0.08) for every passenger per kilometer.

Hou Jia, a representative from China Association of Prices, generally agreed with the commission's scheme, saying the maximum floating and discount have protected the consumers' interests and can ward off vicious competition among airlines.

"I agree with the scheme in principle, but the detailed measures need more consideration,'' said Hou, suggesting a hierarchical ticket-pricing structure tailored to busy and slack flight routes.

The benchmark price of tickets for busy courses should be lower than those of slack routes.

The views of aviation industry delegates were focused on more freedom to decide ticket prices.

"I believe the role of government in the market economy is to decide rules and keep order, but not to be involved in price setting,'' said Xuan Yu'en, from South China-based Shenzhen Airlines.

"On the contrary, air companies, as major market players in the sector, should be granted such rights to decide prices in line with market situation,'' said Xuan.

But the proposal seemed to be radical compared with the scheme submitted by the State Council commission.

"We should take both active and sober approach to domestic airfare reform,'' said Tan Xinglu, an official with the State Council Airfare Reform Leading Group. He insisted that the prices should be currently guided by the government.

Industry insiders believed the government's step-by-step reform strategy since the 1980s aimed to sharpen the competitive edge of the domestic flight companies which are mostly owned by the State without facing major market risks.

(China Daily July 16, 2003)

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