Higher ceiling airfares under thorough consideration

Relevant agencies are weighing carefully higher ceiling domestic airfares to help ease local financial airlines’ burdens made heavier by the increasing price of the world’s crude oil and the devaluation of Vietnam dong against the dollar.

Lai Xuan Thanh, deputy director general of the Civil Aviation Administration of Vietnam, said the agencies including the transport and finance ministries would decide new ceilings for the domestic airfares based on the operational costs of airlines, domestic demand for air travel and price changes in Vietnam.

Thanh was speaking to the Daily on the phone on Thursday after Vietnam Airlines had appealed to ministries to raise ceiling airfares by some 20% compared to current levels, and even to remove the cap on airfares in the coming years.

Late last year, Vietnam’s low-cost Jetstar Pacific Airlines wrote to the agencies with the same purpose. In a recent interview with the Daily, Truong Thanh Vu of Air Mekong said this private airline wanted ceiling airfares to be higher and removed so that the carrier would be able to map out flexible business plans to better tap changing demand in seasons of the year.

The current highest economy-class airfare is VND682,000 (US$32.6) for a flight of less than 300km, VND864,000 for between 300km and less than 500km, VND1.182 million for 500km to less than 850km, and VND1.819 million for longer flights. These airfares exclude value-added tax and airport tax.

Asked about the possible change to ceiling air tickets, Thanh said Government agencies would continue their control over this area but with a view to create favorable conditions for domestic carriers because the ceiling airfares were important to their operations and expansion.

Both Vietnam Airlines and Jetstar Pacific complained that the existing ceiling airfare system made their efforts to break even from flights hard, and their life had been made tough due to the stronger greenback over the local currency, and volatile prices of the world’s crude oil. The central bank on February 11 devalued Vietnam dong by 9.3% against the dollar.

Jetstar Pacific told the Daily on Thursday that it had to use the U.S. dollar to pay up to 80% of operational costs, with the greater part going to jet fuel and leasing aircraft, while all income was in Vietnam dong. Therefore, the operational cost has been up remarkably or nearly the same with the depreciation rate of the dong compared to the greenback.

The dong devaluation has also placed big impact on Vietnam Airlines, forcing the national flagship to earmark over VND1 trillion (some US$48 million) to secure payment for its loans in foreign currency this year. Last year, the airline spent more than VND1 trillion on this purpose. – Saigon Times

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