28th March 2023 – (Hanoi) Vietnam will raise the fare caps on domestic airlines that have remained unchanged since 2015 by an average 3.75 percent in the second half of this year, local newspaper Vietnam News reported on Tuesday.
The Ministry of Transport plans to impose a new ceiling on one-way ticket prices based on the flying distance.
Accordingly, flights of 1,280 kilometres and above in distance are subject to the biggest hike of 6.67 percent to 4 million Vietnamese dong (170 U.S. dollars). The fare cap on flights from 1,000 to 1,280 kilometres is about to rise 6.25 percent to 3.4 million dong.
Hikes of 3.58 percent and 2.25 percent will be applied to flying distances from 850 to 1,000 kilometers and from 500 to 850 kilometers, respectively. Meanwhile, no changes will be made to ticket prices for flights under 500 kilometers.
The move is expected to raise the overall annual consumer price index by 0.07 percentage points, according to the General Statistics Office.
Local airline executives kept calling for the government to remove price caps on domestic airfares, saying that they have been struggling to make profits amid surges in fuel prices, staff salaries, aircraft rentals expenses and costs of exchange rate volatility, said Ho Ngoc Yen Phuong, vice president of budget carrier VietJet.
The Civil Aviation Administration of Vietnam said high fuel costs, the single biggest line of airlines’ operating expenses, are eating away at domestic airlines’ profitability.
The country’s flag carrier Vietnam Airlines reported a loss of 10.09 trillion Vietnamese dong (428 million dollars) in 2022, blaming higher jet fuel prices and a weakened domestic currency.
Industry experts and economists argued that with the removal of airfare caps, competition would be set to increase, especially in the busy routes.
The aviation authorities have proposed no airfare caps on flying routes with three carriers or more for better services while the maximum limit may continue on the monopoly routes.