China Southwest Airlines started on March 29 to offer group clients a 10 percent discount on ticket prices.
Five other air companies, who got involved in a cartel with Southwest Airlines in March and had reached a consensus on their ticket prices, reacted quickly to the news by lodging a complaint with aviation administration departments asking them to check the price cuts and "restore market order" the very next day.
These companies are like a gang who have arranged to go into battle together, while Southwest Airlines plays the part of deserter. No wonder they were so upset.
But is Southwest's conduct really so deplorable?
The move has stirred up panic among some air companies who worry that a price war may sap their profitability.
But it is exactly what consumers have been waiting for.
Domestic air companies have long received complaints for their high prices and poor service. Strong competition will force them to reduce costs and improve management.
However, many airlines cannot be bothered to make a concerted effort to safeguard vested interests.
The latest example took place a few weeks ago, when 20 domestic air companies agreed in Wuhan, Hubei Province, to prolong their cartel, which covers more than 150 shuttle routes, smashing hopes for a price liberalization in the short run.
Moreover, the Civil Aviation Administration of China (CAAC) has ruled that whoever breaks the cartel should compensate the remaining parties.
Such cartels are understandable, to an extent. Most air companies are State-owned and CAAC does not want to see any lost through fierce competition. They also worry that excessive discounts will lead to a drain on State assets.
But it cannot justify the fact that the cost of maintaining poorly performing airlines is being shifted onto consumers, whom have to accept unreasonably expensive tickets.
And the untouchable pricing mechanism, although it protects these lame ducks from being thrown out of the market, will throttle the vitality of prominent air companies.
It will throw the domestic aviation industry into dire straits once the market opens to powerful foreign airlines.
As the industry's top watchdog, the CAAC should be mindful of this future problem. Perhaps it is weighing up the yeas and nays of a complete market free-up before it decides to take the next vital step.
Naturally, it takes time and effort to make such a decision. But it should take care not to come too late, for consumers have been waiting too long for the prices they deserve.
(China Daily 04/11/2001)
