Shanghai-based budget carrier Spring Airlines rose the price of its cheapest fares from Shanghai to Yantai, Nanchang and Mianyang by 100 yuan (US$12), bowing to pressure from other competing airlines.
However, the new 299 yuan (US$37) ticket price now includes one night's hotel accommodation.
Backed by heavy advertising and news coverage, Spring's maiden flight from Shanghai to Yantai took off on July 18. The company offered a 25 per cent discount from an already low fare, massively undercutting the current average ticket price of 800 yuan (US$99) charged by other companies on the same route.
The discount fare quickly became a cause for concern among other airlines and it was their protests that reportedly led to the General Administration of Civil Aviation of China (CAAC) putting pressure on Spring to raise prices.
"We raised the price in accordance with Regulation No18 of the CAAC," said Li Weimin, a Spring spokesman. "The other companies' requirement was another reason. Both led to raising the price."
CAAC regulations limit discounts to 45 per cent of standard prices.
Spring cut costs by serving no meals or snacks on the flight.
Despite the price hike, officials from Spring said they will continue to work to attract passengers and encourage people to book flights online.
Meanwhile, company officials from other airlines said the 199-yuan (US$25) deal had achieved its purpose of attracting publicity in the run up to the company's launch.
Ge Xuejing, Spring's executive officer, said that fixed costs make up more than 80 per cent of the price of every ticket. These costs include fuel (30 per cent), maintenance (25 per cent) and lease costs (25 per cent). Only a marginal 20 per cent of the ticket price can be subject to discounts or deals.