China's 'all you can fly' deals risk cutthroat price war

Demand for air travel within China has picked up, but airlines have had to engage in a costly battle for customers by offering all-you-can-fly tickets. Shi, a 31-year-old Shanghai resident, has visited over 10 cities on a single 3,322 yuan ($480) ticket from China Eastern. The deal allows for unlimited flights on weekends. Among the destinations Shi crossed off his list are Inner Mongolia and Gansu Province. China Eastern was the first out of the gate in June with its "Fly as You Wish" unlimited passes that are good until the end of the year. Others soon followed, including China Southern and Spring Airlines. Such packages are available from about 10 airlines as of mid-August, with the roster including both full-service operators and budget carrier. All-you-can-fly tickets are a huge gamble since the carrier essentially abandons any chance for earnings growth, according to a source at a Japanese airline. Normally, ticket prices are constantly adjusted to demand in a way that maximizes revenue. If an airline fills seats with all-you-can-fly passengers, the company will miss out on the opportunity to sell tickets at higher price points. Although Chinese airlines recognize the risks, the fear of being left behind by rivals has won out. Passenger numbers are recovering from earlier doldrums for domestic travel, but conditions are still shaky. Carriers will do whatever they can to win over regular customers.<br/>