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)