Under a plan of the ministry, the cap on domestic airline tickets will be applied to four kinds of flights. VNA/VNS Photo

HÀ NỘI — The domestic price cap for air service will increase by an average of 3.75 per cent from the second or third quarter of 2023, according to the Ministry of Transport.

Under a plan of the ministry, the cap on domestic airline tickets will be applied to four kinds of flights.

New airfares for flights with a distance of 1,280km upward, from 1,000 to under 1,280km, 850 to less than 1,000km, and from 500 to under 850km will rise by 6.67 per cent, 6.25 per cent, 3.58 per cent and 2.25 per cent to a maximum of VNĐ4 million (US$170.03), VNĐ3.4 million, VNĐ2.89 million, and VNĐ2.25 million, respectively.

Fares for air routes with a distance of less than 500km and State-supported ones will not change.

According to the Civil Aviation Administration of Việt Nam (CAAV) and the General Statistics Office, this adjustment is expected to contribute to increasing the country’s CPI this year by about 0.07 percentage points.

At a seminar held by the Việt Nam Aviation Business Association (VABA) in late February, representatives of airlines and transport experts suggested removing the price cap for domestic air service to ensure a variety of price policies to provide the best quality products to customers.

Nguyễn Mạnh Quân, Bamboo Airways’ General Director, proposed to the Ministry of Transport urgently consider adjusting prices on the basis of legal regulations and actual inputs.

He added that the price ceiling for routes with three or more operators should be removed, but still maintain State management if any route has only one operator. Removing the ceiling price or raising the ceiling price would not affect consumers, but diversifying price policies to provide the best quality products to customers.

Lương Hoài Nam, a transport expert, said the ceiling price of air tickets that still exists so far is a terrible absurdity and should be stopped as soon as possible. The ceiling price has deterred airlines to increase revenue in the peak period (summer period in June-July and Tết Holiday).

If the price ceiling is removed, firms could improve the low-peak periods. The price ceiling inhibits the growth of domestic airlines because this market is completely independent of expensive ticket prices. The view is to amend the laws and decrees to remove the ticket price ceiling to decide based on the market economy, he added.

The latest increase in the ticket price ceiling was in 2015.

As for the price of domestic passenger transportation services, according to the CAAV’s report, the proportion of fuel costs accounts for 39.5 per cent of the total cost of the airline.

With fluctuations in the USD/VND exchange rate, the airlines' fuel costs in December 2022 increased by 62.39 per cent compared to December 2014 and increased by 80.93 per cent compared to September 2015, making the total business expenses increase by 27.9 per cent compared to December 2014 and by 33.47 per cent compared to September 2015. VNS