Cross-strait trips will cost lot less

Beijing plans to cut air fares between the mainland and Taiwan by as much as 15 percent to boost cross-strait ties.

Analysts say such a move might trigger a price war among carriers - including Cathay Pacific (0293) - that serve the region.

Li Jiaxiang, director general of the General Administration of Civil Aviation, told a Xiamen conference yesterday that the price cut could be in the range of 10-15 percent, Taiwan's Central News Agency reported.

A final decision is to be reached after further talks with carriers, and Li did not offer thoughts on when lower fares could take effect.

China Eastern Airlines (0670) and Cathay Pacific stand to be the carriers affected most by a price cut, experts say.

And cross-strait travelers could decide to cancel any plans to fly via Hong Kong if direct fares are reduced.

"CEA and Cathay operate many international routes, so the impact on those two is likely to be greater than China Southern Airlines [1055], which focuses on domestic flights," said Kenny Tang Sing-hing, head of research at Redford Securities.

Tang noted that cheaper fares could lead to lower earnings for the two carriers, "but this can be offset by an increase in passengers and flights." On that, he pointed to the possibility of a price war as airlines chase passengers.

The head of equity markets at Delta Asia Financial, Conita Hung Lai-ping, said lower fares will be positive and boost the number of cross-strait tourists.

"The cross-strait economic relation will also be strengthened as a result," she added.

Beijing plans four new airports along the western coastal area of the Taiwan Strait - called Haixi - over the next five years to accommodate more flights across the strait.

That Beijing intended to increase the number of flights was among the points Li raised in Xiamen.

Beijing and Taipei have already signed a deal for a 10.5 increase in the number of flights, taking the number to 420 a week from the present 380.

The Standard