The Fair Trade Commission yesterday fined China Airlines and EVA Airways a combined NT$32 million (US$1.85 million) for failing to lower airfares on cross-strait flights and engaging in practices that compromise the free market.
The commission said that since April last year, media had widely reported on the high cost of airfares on flights across the Taiwan Strait, despite the decreased travel time and distance. The criticism, combined with negotiations between the Ministry of Transportation and Communications and the two airlines, resulted in the two companies agreeing to cut prices of cross-strait flights.
However, an investigation by the commission showed that despite the lowered airfares, the average cost of cross-strait tickets had risen because of a larger proportion of more expensive first and business-class tickets and a substantially lower proportion of economy-class tickets.
Fair Trade Commission Vice Commissioner Shih Hui-fen (施惠芬) said the two airlines had raised the proportion of more expensive tickets so that travelers had difficulty booking in economy, which tended to sell out quickly, leaving travelers no choice but to book more expensive seats.
Citing data collected by the commission, Shih said that proportionally, first and business class tickets sold by China Airlines in January last year accounted for 20.63 percent of those in economy, a figure that rose to 39.28 percent in April and peaked at 82.69 percent in June.
In the case of EVA, first and business class tickets sold in January last year accounted for 30.47 percent of those in economy, rising to 54.16 percent in April and 64.37 percent in June, she said.
“While it may appear that the two airlines cut fares for individual [cross-strait] tickets, in actuality, the average price of tickets has risen,” Shih said.
The investigation also showed that the two airlines did not give travel agencies much room for offering discounts on cross-strait flights.
The commission said China Airlines has about 30 percent of the cross-strait market, while EVA has about 20 percent, and as a result the practices adopted by the two companies severely undermined fair trade.
The commission fined China Airlines about NT$20 million and EVA NT$12 million for violating the Fair Trade Act (公平交易法).
At a press conference late yesterday, Deputy Transportation and Communications Minister Yeh Kuang-shih (葉匡時) said the commission was an independent body and that it was not obligated to inform the Civil Aeronautics Administration (CAA) that it was investigating pricing mechanisms.
Furthermore, the CAA does not have the authority to intervene in such an investigation, Yeh said.
However, Yeh said that the investigation was conducted between April and October last year when the World Expo was being held in Shanghai, adding that fares fell from November.
“The prices reflected supply and the demand,” Yeh said. “Supply and demand are out of balance.”
To increase supply, Yeh said the ministry would seek to raise the number of cross-strait flights during the next round of negotiations with Beijing.
Additional reporting by Shelley Shan