Although CAAC, the administrative body of China's civil aviation industry, will still sign new contracts with state-owned airlines, insiders have suggested that discounted air tickets between major domestic cities might be made available.

CAAC has banned any form of discounted fare since 1998, and promised late last year it would loosen price controls at an appropriate time this year.

A report from the China News Service quoted CAAC sources as saying that the administration will approve more air routes to sell discounted tickets after the industry's regrouping is completed in the first half of 2001.

Ten CAAC affiliated airlines will be merged into three air groups based on Air China, China Eastern Airlines and China Southern Airlines.

The restructuring is expected to be approved by the State Council in the first half of this year, marking an important step in creating a more open aviation market.

CAAC approved seven air routes, linking major domestic cities, to offer discounted tickets this February, in a move considered the first step toward a large-scale discount relaxation.

CAAC said good performances by the seven air routes last month have helped the administration loosen its grip over China's airlines, and new ticket prices will be based on market demands.

The annual work conference of CAAC is under way in Beijing this week, and the airlines' regrouping and price policies are expected to be hot topics on the administration's agenda.

Local airlines refused to comment on a possible decision by CAAC, though most of them agreed that a more competitive market would help propel the development of the industry.

But some officials with large-scale airlines have stated their view that the price control has certain advantages for their companies.

In their opinion, the price control has helped prevent cut-throat competition among domestic airlines, thus given airlines more time to concentrate on upgrading their management systems.

(China Daily 03/27/2001)