SHANGHAI (Reuters) - Chinese airlines will be able to set their own prices on more than 300 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 holiday approaching in February.
The Civil Aviation Administration of China said late on Friday that it would allow airlines to decide their own prices on domestic routes that have at least five carriers competing. Price increases of no more than 10 percent would be allowed for each travel season.
“Every one 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 (1055.HK) likely would be the biggest beneficiary as it had the largest domestic market share, she added.
China Southern shares leapt more than six percent to an over two-year high, while Air China (0753.HK) rose more than 8 percent to its highest level since Nov 2010 and China Eastern Airlines (0670.HK) climbed more than 5 percent.
Beijing 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.
The new ruling applies to at least another 306 routes, including the profitable Beijing to Shanghai route, according to the document that was dated Dec. 17 and published by the regulator on its website.
Reporting by Brenda Goh; Editing by Stephen Coates