On October 10, the Beijing Capital International Airport (BCIA) stock company  announced that it would lower the price of 852 types of catering commodities, accounting for 50 percent of the total. The operation is proceeding smoothly.

 

The announcement was made by BCIA, in association with the Beijing Airport Catering Service Company and individual merchants in the airport. The price-adjustment action covers Chinese food, Western cuisine and fast food.

 

Coffee comes in first with the biggest price cut of 40 percent. According to Beijing Morning Post, the price of coffee at 14 coffee houses in BCIA has decreased. In one location, the price for the highest quality mocha coffee has dropped from 45 yuan (about US$5.6) to 27 yuan (about US$3.3). Common coffee is even cheaper.

 

BCIA spokesman Zheng Fang explained that since international chain brands came to BCIA, they have kept the price and the quality of commodities in the airport the same as in city districts, so there has been almost no question of gouging passengers.

 

BCIA will use the prices of international chain brands as a reference point to adjust prices for non-chain stores' goods. For similar products, BCIA will manipulate the price by controlling the gross margin of commodities.

 

The reason for keeping independent operators' prices in line with those of the international chains is because the pricing of the latter is transparent and consistent, Zheng explained. Besides, different commodities have different gross margins, and controlling them helps stabilize commodity prices.

 

The Beijing Municipal Commission of Development and Reform (BMCDR) has made it clear that prices in the airport will be decided by the business operators themselves. As for the much higher prices of some commodities, BMCDR generally consults with the airport to reconcile the problems. For instance, BMCDR may advise the airport bring in more operators and lower prices through increased competition.

 

A Beijing Morning Post reporter noticed that current price marked on an airport vending machine for a 355 milliliter can of Coca Cola is five yuan (about US$0.6), a 180 milliliter Nescafe is eight yuan (about US$1) and a bowl of pickled mustard green noodles is 16 yuan (about US$2). As the airport staff explained, the prices of catering commodities have been lowered by three to five yuan (about US$0.4-0.6), sometimes even tens of yuan.

 

The airport indicated that the price-lowering plan refers to catering goods only; retail goods are not included. However, there is room for retail price depreciation, and more moves will be pushed in the future.

 

The price-lowering plan has been considered to have something to do with a change in BCIA's strategy for attracting tenants.

 

According to the airport, at the end of the last year, some merchants' leases had expired and the airport developed a new strategy to attract tenants. Payment terms have fundamentally changed from only receiving a fixed rent to receiving a benchmark rent plus a percentage of the tenant's profits.

 

If a merchant's business performs poorly under the new system, he need only pay the benchmark rent, said the airport. However, if he operates well, not only he himself will profit, but the airport will also benefit.

 

(China.org.cn by Zhou Jing, October 20, 2005)