It says the move will allow airlines to offer up to a 40 percent discount on domestic fares, double that of the existing baseline of 20 percent.

Conversely, demand could push fares up by 40 percent of the base price.

According to the report by Beijing Business Today, the policy will be introduced before the end of next year.

The nation's civil aviation regulator, the General Administration of Civil Aviation of China (CAAC), imposed a strict ticket discount ban in 1999 after a ticket price war a year earlier put the industry into severe deficit.

CAAC began to relax its ticket policy over limited air routes at the start of last year, while only several large State-owned airlines were able to continuously enjoy the privilege.

The newspaper report claimed many airlines ignored the ban and were secretly providing discounts of up to 45 percent on tickets.

It said the administrative measures had largely lost control of ticket pricing in some central cities, except in the nation's capital and Shanghai.

A CAAC representative refused to comment yesterday about the report, but said the regulator was investigating the claim about continued ticket discounting.

"The new policy must tightly follow market demands and China's overall reform condition, so it can not be done in a hurry," he said.

"We have no timetable for its introduction so far."

CAAC Vice-Minister Gao Hongfeng made it clear late last month that ticket prices will be more flexible in the near future as the market progressed to become totally open.

But he said it will probably take a couple of years to happen.

(China Daily November 14,2002)