Mon, Jul 22, 2013 - Page 8 News List

Flight cost hike is unjustifiable

By Lee Wo-chiang 李沃牆

The Ministry of Transportation and Communications recently decided to increase the cost of domestic flight tickets in three waves.

The decision has met with strong resistance from the residents of the outlying islands of Kinmen, Matsu and Penghu. Air transport is the main form of transportation for those who live on the islands.

These islands have a low elasticity of demand and when prices increase, airline monopolies make more money, although it is a huge blow for those living on the islands.

First, the average income of people living on the islands is not even two-thirds of what people living on Taiwan proper make.

Though they receive subsidies on their air tickets, price hikes will increase the burden for those who often have to travel and forth.

Also, once the prices are increased, the cost of tickets may surpass NT$5,000 (US$167), which is close to international tickets to places like Hong Kong and Macau.

The outlying islands, which are heavily reliant on the tourism industry, will suffer even more once flight prices go up because of the large choice of other destinations on offer to tourists.

This comes on top of impacts from the three links — direct transportation, communications and trade links between Taiwan and China.

The Civil Aeronautics Administration (CAA) justified the price hikes by saying that there has not been an increase for eight years and pointed to increases in the cost of fuel.

By increasing ticket prices, the airlines are planning to make consumers pay for their losses, which is unreasonable.

Most airline companies providing domestic flights are losing money and when we take a closer look into things, we will see that the main reason is not increased fuel prices.

There are studies that show that because of the abnormally competitive environment of the domestic flight market, when flight prices are raised, tickets sell on the market for less than that of their listed price and this is causing huge losses to airlines.

To turn around and demand that the ministry allow them to increase ticket prices to make up for their losses by citing the fact they have not increased ticket prices for many years is thus not a legitimate reason.

In addition, an excessive number of flights means that airline companies are not efficient.

Also, the opening of the highspeed rail had a large “magnet effect” that caused the passenger load of flights within Taiwan to shrink.

When this happened, the airline companies either lowered their prices to attract more customers, shut down, or reduced the number of flights offered.

A look at flights between Taiwan proper and Kinmen reveals that this has always been a popular route.

It normally has a passenger load of about 70 percent, although during peak season, all flights are full.

The annual revenues of the airline companies operating this route are in excess of NT$2 billion and it is only natural that these firms would give something back to the residents of Kinmen.

How can they say that flight costs to places further away will have to rise more, and then raise the cost of flights to Kinmen the most?

What sort of twisted logic is that?

It cannot be doubted that rises in fuel costs affect the profits of airline companies, although the CAA should look into whether deregulation of the domestic market has gone too far and whether this has resulted in an excessively competitive environment.

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