Universal Travel Group expects to benefit from changes in domestic discount rates
Universal Travel Group, a growing travel services provider in the People’s Republic of China ("PRC") specializing in online and customer representative services to the travel service industry, announced it expects to benefit from recent changes in domestic airfare discount rates offered by domestic airlines.
Discount rates are the percentage of reduction of full, face value fares offered by domestic airlines to travel agents in the PRC. According to a news report by the Xinhua News Agency on April 19, 2009, the government recently instituted a new airfare pricing system designed to partially roll back some of the deep discounting that has battered airline industry earnings. Under the new mechanism, the component of the base ticket price that airlines can discount has changed. In the past, the benchmark price ordered by the government and the floating component of the ticket price determined by the airlines were subject to discounting.
Now airlines can only discount the benchmark portion of the ticket price. As a result, an economy ticket sold by Xiamen Airlines, for instance, now will be priced at 8 per cent off, compared with a 10 per cent discount previously, while a ticket formerly discounted by 15 per cent now will be sold at 12 per cent off, the agency reported.
The moderate increase in ticket prices after the change in the discount rates should help to reduce ticket price volatility since the smaller discount rate cuts are expected to encourage travelers to purchase tickets in a more timely manner. This stability in airfares should help travel agencies and online reservation platforms, such as Universal Travel Group, generate more stable revenue, higher profit margins, and more frequent booking online and through its TRIPEASY Kiosks. The lower discount rate cuts should also provide a floor on discounts rates to 30% off the face value of ticket prices, helping to prevent price wars amongst the airlines.
"This is great news to Universal Travel Group as well as the overall travel and leisure industry," said Ms. Jiangping Jiang, Chairwoman and CEO of Universal Travel Group, "The smaller discount rate cuts should promote healthy competition and reduce revenue fluctuation for the Company. This is a step in the right direction and we are confident about the positive impact this change will bring to the growth of our industry."
Karen
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