New price cap on domestic flights

The Civil Aviation Administration of Vietnam (CAAV) has proposed heightening ceiling on airfares for domestic routes.

The CAAV is seeking approval from the ministries of Finance and Transport to raise the maximum prices for air tickets for local flights by between 20% and 27%.

The move is aimed to offset the losses for local airlines that have resulted from an increase in oil prices and the devaluation of VND.

For air routes of below 500km, the CAAV has proposed increasing the maximum prices should be raised by 27%. A hike of 25% would be applied to flights in the range of 500km to 850km, and 22% for 850km-1,280km and 20% for more than 1,280km.

Vietnamese carriers had previously proposed a similar hike, of between 20% and 25%.

Lai Xuan Thanh, Head of the CAAV, said the recommended hikes are not unreasonable, and based on calculations of the market’s real situation as well adjustments to the currency exchange rate.

“Currently, over 70% of airlines’ total costs are paid in USD, including fuel purchases, aircraft and staff pay. Particularly, fuel purchases account for up to 36% of total costs. The state should seriously consider their proposal,” Thanh added.

He, however, noted that the increase of airfares at this time could have wide-reaching effects therefore, it is necessary to assess these impacts carefully.

The current highest economy-class airfare is VND682,000 (USD32.6) for a flight of less than 300km, VND864,000 (USD41.3) for between 300km and less than 500km, VND1.182 million (USD56.55) for 500km to less than 850km, and VND1.819 million (USD87.03) for longer flights. These airfares exclude value-added tax and airport tax. – Dtinews

Tags: Vietnam aviation, Vietnam aviation industry, Vietnam aviation market