Flight prices head for the sky

>> Vietnam Airlines to increase domestic airfare prices

The Civil Aviation Administration of Vietnam (CAAV) has  recently announced the Ministry of Finance’s (MoF) Decision 2967/BTC-QD regulating economy class airfare ceiling levels on domestic routes which was rubber stamped in early December.

The revision brought a wide range of airfare prices up as well as a fresh price management model.

Accordingly, the ceiling was set at VND5,000/passenger/km not including value added tax. However, starting from January 1, 2012 air carriers will be allowed to set their airfare ceiling at VND3,000/km only.  

The airfare will be applied unanimously by diverse air carriers in each development period and be categorised into five regulated flying distances, according to the decision.

“Price revisions in each developmental period are important to ensure passenger interests since local aviation market still features a monopoly when an air carrier holds up to 70 per cent market share. The airfare will be set by the market when market competition becomes healthier,” said CAAV deputy chief Luu Thanh Binh.

Getting the MoF’s green-light, the CAAV forwarded a dispatch guiding air carriers to set concrete airfares on five regulated flying distances with at least seven price levels for each route.

Right after the MoF move, national flag carrier Vietnam Airlines declared its new airfare prices would become effective from December 15, 2011 with highest price hike of 20 per cent over existing levels.

“We will not raise the airfare unexpectedly on Lunar New Year occasions to share passengers’ difficulties,” said Vietnam Airlines director Pham Ngoc Minh.

Accordingly, Vietnam Airlines will continue offering customers competitive price levels. Particularly, it presents a wide price range of 10 different levels on domestic routes. For instance, economy class airfare ceiling on Hanoi-Ho Chi Minh City route is set at VND2.56 million ($122), but there are different price levels with the lowest set at VND1.05 million ($50) depending on time of purchase.

Other airlines like AirMekong, Jetstar Pacific and Vietjet Air were yet to have any feedback after the recent MoF move.

According to MoF’s Price Management Department director Nguyen Tien Thoa, the airfare revision was based on Vietnam Airlines’ 2010 audited business expenses and 2011 estimated expenses including price depreciation factor since Vietnam Airlines holds a 70 per cent stake in local aviation market.

“Related factors for airfare ceiling calculation such as petrol, exchange rate, aircraft and pilot leasing fees were all audited. Passenger should not be anxious since there are diverse levels in airfare price ranges,” said Thoa.