Airline shares soar on fare price liberalization
Chinese airlines will be able to set their own fares on more than 300 domestic routes after the aviation regulator further liberalized fees in a major step forward for reform of the world’s fastest-growing civil aviation market.
Airline shares surged on Monday amid expectations that the move will boost profits, with the Lunar New Year national holidays approaching in February.
The Civil Aviation Administration of China said late on Friday that it would allow airlines to set their own fares on domestic routes that have at least five carriers competing. Increases of no more than 10 percent would be allowed for each travel season.
“Every 1 percent rise in the domestic ticket price system-wide boosts the Chinese airline sector’s earnings by 7 percent based on our estimates,” said Corrine Png, Singapore-based chief executive of transport research firm Crucial Perspective.
China Southern Airlines likely would be the biggest beneficiary as it has the largest domestic market share, she added.
China Southern shares rose more than 6 percent to the highest level in more than two years, while Air China rose more than 8 percent to its highest level since November 2010 and China Eastern Airlines climbed more than 5 percent.
China has pledged to allow market forces to play a more decisive role in its aviation industry to improve service quality and efficiency.
It relaxed airfare restrictions for the first time in nearly a decade in 2013, and two years later allowed airlines to set ticket prices on 101 routes.