Expanded domestic flight discounts expected as oil prices continue to fall; price cut mechanism may kick in as early as early February

▲ Domestic flight operated by Uni Air. (Photo / Reporter Chen Tzu-yin)

Travel Center / Comprehensive Report

Domestic flight discounts will be further expanded. The Civil Aeronautics Administration (CAA) under the Ministry of Transportation and Communications has asked airlines to increase the proportion of discounted tickets (50–70% off) from 20% to 30%, scheduled to take effect on January 7. In addition, international oil prices have continued to decline, falling to the threshold for domestic airfare calculations. A price reduction mechanism could be launched as early as early February, with implementation expected in March.

On December 15, 2014, the CAA implemented expanded domestic flight discounts, requiring airlines to reduce 10% of their originally 30% 70%-off tickets to 50–65% off. The discount period was set to last until the end of January this year. On the 6th, the CAA asked airlines to expand the 20% ratio of 50–70% off tickets to 30%, still split evenly between 50–65% off and 70% off, with the new discount scheme applicable until the end of February.

50% and 70% off domestic flight tickets are considered off-peak early-bird tickets; if canceled before departure, airlines will charge a maximum refund fee of 25% of the ticket price.

In addition, fares for 24 domestic routes were only raised on New Year’s Day 2014, with most increasing by 10%, some by 8–9%, and a few by 2–4%. However, international oil prices have been falling since last year, and the CAA has observed that they are close to reaching the threshold for domestic airfare calculations.

The CAA stated that fuel costs account for about 30% of the operating costs of domestic routes. To appropriately reflect the impact of oil price fluctuations on fares, the adjustment of domestic airfares last year took oil price changes into account. According to the CAA’s domestic airfare mechanism, if the average price of domestic aviation fuel announced by CPC Corporation over three consecutive months reaches NT$21.74 per liter, a price reduction mechanism will be triggered.

The CAA said that the current three-month average aviation fuel price announced by CPC is NT$21.86 per liter, just NT$0.12 above the price reduction threshold, and it is expected that the domestic airfare reduction mechanism could be activated as early as early February.

However, when adjusting domestic airfares, airlines must also calculate the adjustment range based on the cost of each route. If the price reduction mechanism is triggered in early February, the earliest possible time for implementing the fare cuts would be early March. (Source: Central News Agency)