1. Reform of Price Regulation of Domestic Passenger Air Services in China Breaking Down Non-tariff Barriers to Trade in the Transport Sector Case Study Presented by P. R. China May 22, 2006, Hanoi, Vietnam

2. Overview of the Reform Process of Price Regulation on Domestic Passenger Air Services (1) Before 1992 Strict regulation: the government directly specified the price. 1992-1997 Began to ease control: airlines were allowed to offer 10% discounts.

3. Overview of the Reform Process of Price Regulation on Domestic Passenger Air Services (2) 1997-1998 Trial reform : airlines were allowed to discount down to 40%. 1998-2004 Strict regulation again Reasons: the whole industry suffered losses

4. Overview of the Reform Process of Price Regulation on Domestic Passenger Air Services (3) 2004-present New reform: towards a more flexible price regulation system

5. Main Contents of the New Reform (1) Different Routes have different prices 1. Tourist routes or exclusively operated routes-----setting a price ceiling 2. Short haul routes within a province----- completely determined by the market

6. Main Contents of the New Reform (2) 3. Other routes----prices floating between a certain range, I.e., 45% below and 25% above the base rate

7. Reasons for Policy Change Fast growth of China ’ s air transport market The role of the CAAC has changed Encourage airlines to compete Develop underserved markets

8. How the reform conducted Organizer: General Administration of Civil Aviation of China (CAAC) and State Development and Reform Commission (SDRC) Procedure Public hearing

9. How the transport sector responded to the changes Airlines: began to use revenue management system Passengers: more choices for air services products

10. Benefits of the New Reform The aviation industry Airlines Consumers

11. Thank You!