Price alliances in the airline industry are not welcome, says an
article in China Economic Times. The following is an
excerpt:
Five Chinese airlines on Monday jointly launched an express air
service between Beijing and Shanghai, the first in the country.
Flights between the two cities will arrive and depart every 30
minutes. The General Administration of Civil Aviation of China
(CAAC), which initiated the service, is promising a maximum
three-hour turnaround from final check-in to baggage claim.
But passengers will have to pay a higher price for the
convenience. Airline companies have reached an agreement that the
ticket discount can be less than 30 percent. They denied calling it
a price alliance but said the cost of the express service is
rising. They said the transfer of tickets among the five airlines
should be based on unified prices. The companies then fixed the
price to avoid further problems.
If this is not a price alliance, what is? These magnates fixed
the ticket price for an airline and the public has no other choice
- this is the most typical and harmful form of price alliance.
The allied price hikes of instant noodles, television sets and
refrigerators is not as severe because the public still has a
choice as the market is open and competition will disintegrate the
fixed prices. But the civil aviation industry is an administrative
monopoly. The customers have no other choice but to accept the
fixed high price.
People with high expectation for the express service must be
disappointed. The authorities publicly emphasized the service's
convenience but mentioned nothing about the price rise.
The public welcomes improvement in service quality but also
expects an explanation for increased prices. Civil aviation is a
field with less competition and the public is in a disadvantaged
position with less choice. Had the public known about the increased
price, they would probably rethink the express service.
(China Daily August 8, 2007)
