Increase ceiling price of air transport services

According to the revised Circular, the basic economy class passenger transport service price range is as follows: Flights with a distance of less than 500km have a ceiling price of VND 1,600,000/ticket/way for socio -economic development flights and VND 1,700,000/ticket/way for other flights under 500km.

The remaining flight groups have increased prices from 50,000 - 250,000 VND/ticket/way compared to the old regulations, depending on the length of each flight.

Specifically, for flights from 500km to under 850km, the ceiling price is 2,250,000 VND/ticket/way; Flights with a distance from 850km to under 1,000km have a maximum ticket price of 2,890,000 VND/ticket/way; Flights from 1,000km to under 1,280km have a ceiling price of 3,400,000 VND/ticket/way and flights with a distance from 1,280km or more are 4,000,000 VND/ticket/way.

The maximum price includes all costs that passengers must pay for an air ticket, excluding value added tax and fees collected on behalf of the airport (including passenger service fees and passenger and baggage security fees; service fees with additional items).

Previously, the Ministry of Transport said that the proposal to increase domestic airfares was due to changes in factors forming ticket prices, especially rising fuel prices and high exchange rates.

According to updated data from the International Air Transport Association (IATA), the price of Jet A1 fuel in Asia in June 2023 was 85.4 USD/barrel. According to calculations by the Civil Aviation Authority of Vietnam, assuming that fuel costs account for 39.5% of total costs and other cost factors remain unchanged, with fluctuations in Jet A1 prices and the USD/VND exchange rate, the fuel costs of airlines in June 2023 increased by 23.1% compared to September 2015. The impact of fuel prices caused total costs to increase by 10.9% compared to August 2015.

The Civil Aviation Authority has received comments from Vietnam Airlines , Vietjet, Pacific Airlines, and Bamboo Airways about increasing domestic airfares.

According to Vietnam Airlines, aviation fuel costs account for about 36% of the airline’s transportation costs. The average fuel price in 2022 compared to 2015 (when the current price ceiling was applied) increased by about 85%, from 67.3 USD/barrel to 124.4 USD/barrel, causing the airline’s costs to increase by about 30.5%.

At the same time, air transport costs are more than 70% in foreign currency, while ticket sales in Vietnam are in VND. The exchange rate increased by 6.6% from 2015 to 2022 (an average increase from 21,900 VND/USD to 23,350 VND/USD), causing the airline's costs to increase by 4.3% accordingly.

Therefore, Vietnam Airlines' passenger transport cost in 2022 is VND 2,769/passenger/km, 43% higher than the cost in 2015 (VND 1,933/passenger/km)./.

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