An airline price war erupted in China in the middle of 2020, pouring fuel on the fire of the pent-up travel demand following the Covid-19 lockdowns that affected the Lunar New Year holidays in late January. However, this is a price war with a difference.

What’s different about this price war is the innovative use of ‘subscription-based’ pricing techniques and the linkages to loyalty and ancillary offerings.

There have been two distinct phases to the price war. It started on Jun. 18 this year, when China Eastern Airlines introduced its “fly at will” air ticket discount package, offering unlimited weekend flights right through to Dec. 31. The passes sold out quickly and the airline followed up with another package, offering weekday only travel.

The passes can only be purchased through China Eastern’s app and travellers had to be a member of the airline’s frequent flyer programme.

The unlimited travel passes, since copied by most of China’s domestic airlines, have been credited with driving a surge in leisure and VFR travel across China. By this measurement, it has been highly successful as Chinese airlines’ combined domestic passengers recovered to 98% of 2019 levels in September. This includes positive growth at China’s big three state-owned airlines. According to China Eastern, passengers travelling with its “fly at will” product accounted for more than 80% of passengers during the October Golden Week holiday on several of its popular routes.

The passes are also designed to retain customer loyalty – as well as to grow and feed engagement with the airlines’ frequent flyer programmes.

This is a new phase of the price war, which has seen increasing levels of complexity added by the airlines as they seek to build ancillary offerings to optimise revenue and also to evolve their unlimited travel passes to keep up with the competition. This includes packages purely for seat upgrades, and even for passengers who have had to forfeit their travel on another airlines’ programme by offering shorter cancellation notice.

The airlines are also expanding partnerships with hotels and other travel companies to create innovative new package deals. And they’re also expanding and extending their subscription offers deep into 2021, to keep the market engaged – and moving.