The ceiling airfares for domestic routes of below 500km will be kept unchanged at VND1.60 million per one-way ticket for routes which serve socio-economic development (to remote areas or islands operated by only one carrier) and VND1.70 million for other routes.
For routes from 500km to 850km, the ceiling fare will be increased to VND2.25 million, compared to the current rate of VND2.20 million.
The ceiling fare for routes between 850km and 1,000km was proposed at VND2.89 million, an increase of VND100,000. An increase of VND200,000 was proposed for routes from 1,000km to 1,280km at VND3.40 million.
The ceiling fare of VND4 million will be applied for routes of over 1,280km, an increase of VND250,000.
The increase in ceiling airfares was made in the context that jet fuel prices have seen huge fluctuations. Many said that ceiling airfares being kept at low levels was hindering the growth of the aviation sector. Some even proposed to remove the cap.
According to the Civil Aviation Authority of Vietnam (CAAV), the current ceiling airfares have been applied since 2015 when the Jet-A1 fuel price was around USD60 per barrel. Updates from the International Air Transport Association noted the Jet-A1 price in Asia was over USD150 per barrel last year.
CAAV estimated that fuel accounted for around 39.50 percent of the total cost of airlines.
General Secretary of Vietnam Aviation Business Association, Bui Doan Ne, said that carriers won't necessarily simultaneously increase airfares with the rise in ceiling prices.
Six airlines are operating domestic routes and there are no exclusive routes, Ne said, adding that customers could easily access domestic air transport services with a wide range of choice. Other countries were also moving in the direction of loosening and lifting regulations on price brackets.
He said that increasing ceiling airfares would benefit passengers because it would enable carriers to improve service quality through the diversification of airfares and tickets.
The Ministry of Transport said that it is still necessary to impose the ceiling on airfares because competition in domestic air transport remains limited. There is currently one carrier holding a market share of more than 30 percent and dominating the market.
In the long term, the ministry said that the ceiling could be removed when air transport capacity better meets requirements, and the aviation market sees more diverse participation of carriers. The competition must be substantive by ticket prices, service quality and passengers need the right to choose based on their capacity.
The removal of the ceiling on airfares of domestic routes must have an appropriate roadmap, the ministry said.
