Surging costs and fleet changes drive Vietnam's airfares up in 2024

Price hikes on routes such as Hanoi to Ho Chi Minh City, Hanoi and Ho Chi Minh City to/from Danang, Hanoi to Phu Quoc, and Hanoi to Nha Trang now range from 3 per cent to 49.6 per cent compared to the same period in 2023.

Despite these increases, the CAAV said the fares still comply with current regulations governing passenger transport pricing.

According to the authority, the spike in airfares is attributed to a series of global and local factors, primarily driven by high fuel costs.

As of April 16, the price of Jet A1 fuel in Asia stood at $100.25 per barrel, representing a 56.55 per cent increase in fuel costs for Vietnamese airlines since December 2014, and a 74.27 per cent rise since September 2015, when the current fare cap was introduced.

Furthermore, a substantial 8 per cent appreciation in the USD/VND exchange rate in April 2024 compared to April 2023 has pushed costs up nearly 6 per cent for airlines, as 75 per cent of their expenses are paid in foreign currencies.

Fleet dynamics have also shifted, with the total aircraft count dropping to 199, a reduction of 32 from the previous year, largely due to Pratt & Whitney's recall of PW1100 engines for inspections and repairs.

This issue has particularly affected Vietnam Airlines and Vietjet, which have both grounded several Airbus A321 NEOs.

Moreover, leasing and operational costs, primarily in USD, have risen sharply. The leasing cost for an Airbus A321 engine jumped from $48,000-$50,000 in 2019 to $80,000-$100,000 in 2024, and for Boeing 787s from $160,000 per month in 2022 to $370,000 in 2024.

The cost of spare parts has also increased by 10 to 13 per cent since before 2019. These factors, combined with a reduction in available aircraft, have led to higher ticket prices, especially during peak travel periods such as holidays and festivals.

This trend is expected to intensify during the summer of 2024, continuing to pressure domestic airfare prices, particularly on routes to popular tourist destinations.

Meanwhile, Vietnam Airports Corporation has stated that service fees charged per flight constitute only a minor fraction of the total airfare imposed by airlines. The corporation also refuted claims that airports are generating trillions of VND in profits from elevated taxes and fees, which are purportedly driving up the cost of air tickets.

Vietnam Airlines wipes out debt, posts record profit in Q1 Vietnam Airlines concluded the first quarter with a record net profit of over $179 million, putting an end to a streak of 16 consecutive quarters of losses.