Why have air ticket prices gone up?

Shanghaiist is somewhat of a frequent flyer to Beijing, and because he isn't employed by some big multinational but rather runs his own little business, he can only afford to put himself on cattle class and often has to scour the internet for the cheapest available deals. We especially love this nifty little function on eLong.com which shows you the cheapest available flight within a week of your selected departure date. That has worked to our advantage in the past because we have relatively flexible schedules, and we have flown to Beijing for as low as RMB530 (that's RMB400 for the ticket and RMB130 for miscellaneous taxes) on Hainan Airlines.

For the past week though, we've been meaning to fly up to Beijing, but found ourselves having to keep postponing the trip because the cost of the air tickets had gone up as much as 100% in some instances. Today we finally understood why. From Xinhuanet:

Flights are expected to be available every half an hour for trips between Shanghai and Beijing as an air express service project begins trial operation on Monday.

The project, launched by the General Administration of Civil Aviation of China, will allow travellers to change tickets for other flights among the five major domestic airlines as long as they have not gone through the boarding procedure.

The five airlines taking part, namely China Eastern Airlines, Air China, China Southern Airlines, Hainan Airlines and Shanghai Airlines, will each provide travellers with quicker check-ins, security checks, boarding and luggage collection through designated passages.

In addition, the air express service also ensures the time it takes to travel from downtown area of Shanghai to that of Beijing will be less than three hours.

They've put everything really nicely, but if you dig a little deeper, something just doesn't feel right there. Whereas previously there was a sense that airlines were relatively free to price their tickets according to what time you chose to fly, how early you booked your ticket etc., prices are now kept within a very narrow margin and are even identical across the airlines in some instances. And what is the result? Xinhuanet continues:

Meanwhile, as the Shanghai Morning Post learns from a ticket agency, the price of air tickets from Beijing to Shanghai has increased by one to three percent, while no discounts are on offer from Shanghai to Beijing.

Nice. Now we're not anti-competition experts, but it does seem to us that the end-consumer is losing out from all these well-intended "projects". This brings to mind a China Daily story brought to our attention by Adam Minter of Shanghai Scrap which told us some 20 “senior officials” representing the nation’s largest Chinese fast food chains met over the weekend and agreed to raise their prices. The reason for the hike is the rising price of food-stuffs and, in particular, pork. He says:

I could go on for pages about summits of Chinese fast food executives (who brought the refreshments?). But what I’d really like to do is point out that this meeting is a textbook example of price-fixing - that anti-competitive, anti-consumer practice criminalized in pretty much every advanced, developed economy in the world.

That an egregious example of price-fixing could be reported sympathetically in a state-owned newspaper should sound a cautionary note for any foreign entrepreneurs or multinationals ready to enter China believing that the rules of international trade are followed (t)here. Not that such examples have stopped anyone in the past - and I won’t belabor the point now.

Minter's post led Fons Tuinstra of China Herald to make the following comment:

Time for some re-education of the officials who have to discover that price-fixing is not done in the open, but like in the West in secretive and illegal meetings that will be prosecuted when discovered by the government.

And now back to our airliners. Does anyone remember Air China recently announcing their profits rose 2000%? A spokesperson attributed the rise in profitability to the huge demand for domestic and international air travel in China. But really, we couldn't have said it better than Jeremy Goldkorn of Danwei:

Perhaps another significant reason is that Air China does not spend any money on edible food, enjoyable inflight entertainment, or computer systems that make their planes depart on time.

Over the last five years that we've been here, we've seen air ticket prices coming down considerably so we find the latest changes somewhat regrettable. Maybe on our next trip to Beijing, we will take the train instead.

Photo by brappy.