Andrzej Jeziorski/SINGAPORE

The Civil Aviation Administration of China's (CAAC's) new policy on domestic revenue sharing aims to limit fare discounting in the short term and could lead to the consolidation of the country's airline industry around four major groupings.

Beijing has ordered revenue sharing on 100 mainland routes from 1 April and is pursuing plans to merge domestic airlines into four operations focused on ailing flag carrier Air China, China Eastern Airlines, China Southern Airlines and an unnamed airline.

Speaking to the local press, China Eastern said revenue sharing was impractical in the long term and would discourage service improvements, but would stabilise earnings to facilitate mergers. The airline had been lukewarm about linking with what it sees as inferior carriers, while a scheme to merge Air China and China Southern, formulated in Beijing, has now been dropped.

The CAAC banned discounting early last year in a bid to halt a domestic fare war which was raging despite heavy industry losses in 1998.

The ban was widely ignored, however, and after petitions from China Southern, Hainan Airlines, Shenzhen Airlines (all stock exchange listed), China Southwest Airlines and Sichuan Airlines, it said it would consider a relaxing or new regulatory system. The Administration says airlines that continue to discount will lose out since revenues will be shared at levels it decides.

• China Xinjiang Airlines is to take three Boeing 757-200s instead of three centrally ordered 737-700s, which are understood to be earmarked for Shenzhen. The 757s, to be delivered next March, will meet increased capacity requirements, offering a 201-seat configuration against the 737s' typical 140-seat layout.

Source: Flight International