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Ministry proposes ceiling airfares to be lifted

Your browser does not support the audio element. The lifting of the ceiling on airfares would certainly help airlines better meet the needs of passengers, especially during the peak period because airlines could offset the cost of two-way flights.

 

Planes of domestic carriers park at Nội Bài International Airport. Ceiling airfares for domestic flight routes of over  五00 km are proposed to be increased by VNĐ 五0,000 –  二 五0,000. — VNA/VNS Photo

Compiled by Mai Linh

HÀ NỘI — The Ministry of Transport has proposed to increase ceiling airfares for domestic flight routes of over  五00km by VNĐ 五0,000 –  二 五0,000 after eight years of them being unchanged.

The proposal was raised in the draft circular amending Circular No  一 七/ 二0 一 九 about the airfare bracket for passenger transport on domestic flight routes, which was being raised for public co妹妹ents.

The ceiling airfares for domestic routes below  五00km will be kept unchanged at VNĐ 一. 六 million per one-way ticket for routes which serve socio-economic development (to remote areas or islands operated by only one carrier) and VNĐ 一. 七 million for other routes.

For routes from  五00km to  八 五0km, the ceiling fare was proposed at VNĐ 二. 二 五 million, compared to the current rate of VNĐ 二. 二 million.

The ceiling fare for routes between  八 五0km and  一,000km was proposed at VNĐ 二. 八 九 million, an increase of VNĐ 一00,000. An increase of VNĐ 二00,000 was proposed for routes from  一,000km to  一, 二 八0km at VNĐ 三. 四 million.

A further ceiling fare of VNĐ 四 million was proposed for routes of over  一, 二 八0km, translating to an increase of VNĐ 二 五0,000.

The proposal of increasing ceiling airfares was raised in the context that jet fuel prices saw huge fluctuations. Many said that ceiling airfares being kept at low level was hindering the growth of the aviation sector. Some even proposed to remove the caps.

According to the Civil Aviation Authority of Việt Nam (CAA), the current ceiling airfares had been applied since  二0 一 五 when Jet-A 一 fuel price was at just around US$ 六0 per barrel.

Updates from the International Air Transport Association noted the Jet-A 一 price in Asia was around $ 八 五. 四 七 per barrel on June  二.

CAA estimated that fuel accounted for around  三 九. 五 per cent of the total cost of airlines, meaning that the expense in jet fuel of airlines in June  二0 二 三 was  一0. 六 二 per cent higher than December  二0 一 四 and  二 三. 一 四 per cent higher than September  二0 一 七. The total cost increased by  七. 八 七 per cent compared to December  二0 一 四 and  一0. 九 二 per cent than August  二0 一 五.

Besides, the exchange rate was also an important factor which affected the cost of carriers thanks to  七0 per cent of airlines’ expenses being paid in foreign currencies while ticket sales were in Vietnamese đồng.

Statistics showed that the USD/VND exchange rate increased  六. 六 per cent from VNĐ 二 一. 九00 on average in  二0 一 五 to VNĐ 二 三, 三 五0 in  二0 二 二.

Currently, airfares follow a flexible pricing mechanism from low to high depending on ticket terms, time of ticket issuance and market demand.

According to Bùi Doãn Nề, General Secretary of Việt Nam Aviation Business Association, carriers won't necessarily simultaneously increase airfares with the rise in ceiling prices.

There are six airlines operating domestic routes and absolutely no exclusive routes, Nề said, adding that customers could easily access domestic air transport services with a wide range of choices. Countries around the world were also moving in the direction of loosening and lifting regulations on price brackets.  

He said that increasing ceiling airfares would not affect consumers but benefit passengers because it would enable carriers to improve services quality through the diversification of airfares and tickets.

The lifting of the ceiling on airfares would certainly help airlines better meet the needs of passengers, especially during the peak period because airlines could offset the cost of two-way flights.

Economic expert Đinh Trọng Thinh said that domestic airfares should be market–based to create momentum for the aviation industry to overcome difficult times. The aviation industry is important to promoting tourism, he added.

Thịnh said that airlines should cooperate with tour operators, hotels and local authorities in tourist hotspots to promote travelling.

On June  一 九, the National Assembly voted to pass the Law on Price with  九 二. 九 一 per cent approval. Accordingly, the National Assembly agreed to apply ceiling prices on domestic air passenger transport services.

The Ministry of Transport said that it is still necessary to impose the ceiling on airfares because competition in domestic air transport remains limited. There is currently one carrier holding a market share of more than  三0 per cent and dominating the market.

In the long term, the ministry said that the ceiling could be removed when air transport capacity better meets requirements and the aviation market sees more diverse participation of carriers. The competition must be substantive by ticket prices, service quality and passengers need the right to choose based on their capacity.

The removal of the ceiling on airfares of domestic routes must have an appropriate roadmap, the ministry said. — VNS

 

 

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