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Chinese passengers are expected to see lower air ticket prices in the months ahead, sources close to industry watchdog General Administration of Civil Aviation of China (CAAC) said Monday.

This is due to slumping aviation oil prices on international markets and central government efforts to breathe new life into the sluggish airline industry.

China"s sole aviation oil supplier -- the China Aviation Oil Supply Corporation -- announced last Saturday a cut in the aviation oil price per ton to 2,680 yuan (US$324), down 450 yuan (US$54) on its peak price.

Beijing-based Air China consumes 100,000 tons of aviation oil a month, and the new price will save the company 45 million yuan (US$5.4 million) in oil costs every month.

Sources with the oil supplier said the price cut coincided with the slump in international oil prices, which had dived to less than US$20 a barrel earlier this month.
The lower aviation costs provided CAAC with a good reason to lift the 15 per cent additional aviation oil price it had passed on to passengers since last October.

CAAC officials refused to comment on the price issue except to say they are researching every reasonable means to stimulate the sluggish domestic aviation market.

China"s airlines lost more than 2 billion yuan (US$240 million) in the wake of the September 11 terrorist attacks in New York and Washington DC, and the administration was forced to adopt positive policies to shrug off the impacts.

Official documents with CAAC showed China"s airlines have the capacity now to carry 400,000 passengers a day, while daily passengers muster just half the total capacity.

Sources close to CAAC suggested the administration did have a plan to cut the ticket price at the end of this year or early next year.

"The cheaper ticket price is expected to be in place to attract more people to travel by air during the week-long Spring Festival and Labour Day holidays,"" they said. The two festivals fall in February and May respectively.

It suggested CAAC wants to create a positive market condition to facilitate an industry regroup and was offering the price cut as an incentive.

Ten airlines under CAAC direct control are scheduled to be merged into three aviation groups based around Air China, China Southern Airlines and China Eastern Airlines early next year.

CAAC will then cut economic relations with those airlines, and functions only as an administrator of the industry.

"The price cut could be seen as the last gift CAAC hands to those airlines,"" the sources said.

According to China"s Price Law and related price regulations, any big price changes in aviation sectors must experience a public hearing before it could finally come into effect.

Taking such necessary procedures into consideration, lower ticket prices are not expected to be available until January. (China Daily)