Research On The Pricing Of China Airline's Civil Aviation

China's airline industry is the second largest in the world after more than sixty yearsdevelopment. Airline pricing has consistently been the pivot of Chinese airline industryreform, because it affects the development of airline industry, the survival anddevelopment of airlines and concern of passengers. The ticket fare was regulated tightlyand loosely repeated. Until recently, the prices are set according to market situations.Chinese airlines have obtained more freedom to set airfares. Foreign scholars have mademany researches on the factors affecting ticket prices, the price prejudice and so on sincethe US airline deregulation in1978. The studies, especially empirical researches, onChinese airline industry are scarce comparably.This study investigates the pricing in Chinese civil aviation industry. Using data onChinese airline industry, this dissertation quantitatively studies the situation and marketstructure of our airline industry. Employing ticket prices data of airlines obtained fromwebsite and self-collected, this paper studies the factor influencing ticket price and pricedifference or price prejudice, using panel data and Generalized Method of Momentssimultaneous equation econometric analysis. This empirical study consists of four parts.Part I (i.e., Chapter3) sumerizes the back ground and situation of Chinese civil aviationindustry. First, the development history and market structure are reviewed. Second, theairfare and its reforming process are investigated, and then put forward the researchingscope and meaning of airfare study.Part II (i.e., Chapter4) investigates the affecting factors of the biggest three airlinesin China. This study econometrically analyzes the demand, cost, quantity, regional andseasonal factors, which may influence the ticket price, based on panel data of threebiggest airlines of China in major routs between2011and2012.Part III (i.e., Chapter5) studies market structure and airling pricing. Employing thelowest ticket prices available among provincial cities on August12th,2013, self-collectedfrom ctrip website and, this paper studies the factors influencing ticket price incomparison with different market stucures in dynamic point of view, using GeneralizedMethod of Moments econometric analysis.Part IV (i.e., Chapter6) examines the price prejudice and its influencing factors inChinese airline industry. Take the CV, ratio of highest and lowest price, the difference of highest and lowest price and its logarithm as dependent variable, this sduty investigatesthe factors affecting airfare prejudices, using the same data as Chapter5.The major findings are as follows:1. The Chinese airline industry's transportation total turnover, cargoes' turnover andpassengers' turnover are all the second largest, but all are weaker when comparing withthe world's largest market of US. Chinese airlines' competitiveness is even smaller ininternational market.2. The three biggest state-owned airlines, named Air China, China Southern Airlineand China Eastern Airline, take a dominating role in airline market, but the biggestprivate airline, which is Chunqiu Airline, only occupies the tenth position in marketshare.3. The ticket prices are set by market demand mechanism through airline ticket pricereforms. The Chinese aviation industry has taken on the coexistence of the big threestate-owned airlines, endemic airlines, and private airlines, which is unique to theChinese market.4. The ticket prices of our airline industry have only increased by seven times,which is very lower comparing with other social commodities in total.5. The three biggest airlines adopt different pricing strategies among variousdistricts, where the ticket price flying to middle district is the lowest, followed bywestern district and eastern district and with the highest to northeast region cities. Theshare of Airline's and HHI on the route can raise the prices, and the high speed train canlower the prices. Eastern airline charges the lowest price, and Air China charges thehighest, with Southern airline comes in between. the prices make difference amongseasons, where the price in spring is the lowest, followed by winter and summer, with theautumn highest.6. The lowest price is available approximately in the last1or2weeks beforedeparture, when considering the airfare variation and booking times, and this effect ismost obvious in duopoly market. The variation between the highest price and the lowestprice is50.33%of the average price, which indicates significant price discrimination.7. The factors affecting ticket prices have distinctive effects under different marketstructures. The route distance and peak times are positive factor affecting airfare,whereas the existence of parallel high-speed rail service can reduce price significantly.Airline prices in all the markets follow a J-curve pattern. We also determine that factors such as flight numbers, market share, and competitive flights within1h, plane size, and peaktimes have distinctive effects under different market structures.8. The more the number of airlines on a route, the less the price prejudice. Theairline with higher market share takes less price prejudice. Competitive flights within1hcan increase the price discrimination. The existence of parallel high-speed rail servicedoes not affect price discrimination significantly. The three biggest airlines discriminatethe most, whereas the private airlines the least, with endemic airlines in between.