Vietnam airlines raise domestic airfares post-Covid-19

In the midst of the second social distancing period against the Covid-19 pandemic, Vietnamese airlines have quoted new domestic airfares that are three to five times higher than the fares applied since the beginning of the social distancing period, but still remain below the regulated ceiling price.

Source: Vietnam Airlines

Prices on the Ho Chi Minh City – Hanoi route range from VND3.6 million to VND6.7 million for Vietnam Airlines economy class, from VND1.7 million to VND2.9 million for Bamboo Airways’, from VND1.8 million to VND2.1 million for Vietjet Air’s. 

Fares of the Ho Chi Minh City – Hanoi route

Source: Bamboo Airways

Why high airfares?

The prices of domestic flights vary, depending on the time of purchase, Tran Trung Kien, a Thu Duc district-based ticket agent in Ho Chi Minh City told VnExpress. “Travel demand will increase as the social distancing will soon end and in anticipation of the coming public holidays (Reunification day of April 30 and May Day). Supply shortage drives airfares up,” Kien was quoted as saying.

Some airlines explained that travel demand between Hanoi and Ho Chi Minh City is high even during the time of social distancing. Meanwhile, in compliance with the social distancing measures against Covid-19, flights are operated at half capacity with seating arrangement of just two passengers in one row to ensure a safe distance. 

According to the Civil Aviation Authority of Vietnam (CAAV), the Hanoi – Ho Chi Minh City route has been reopened but operated at the frequency of 5-6% below the pre-pandemic capacity. The agent also told local media that though domestic airfares are rising, they are still below the regulated ceiling.

Nguyen Xuan Thuy, a local transport insider, told Kinh te & Do thi that the airlines have heavily suffered from the Covid-19 pandemic and higher air fares are intended to offset the losses. However, as the Covid-19 pandemic is negatively affecting all people and every industry, “I suggest the transport ministry and airlines explain this increase more reasonably,” he was quoted as saying. 

Due to the pandemic, 98% of airplanes have been grounded, local airlines could see a decline in revenue of up to VND65 trillion (US$2.7billion), much higher than the VND30 trillion (US$1.27 billion) previously estimated by the CAAV.

After three weeks of social distancing, domestic airlines have struggled with financial woes, according to Saigon Times. The airlines’ cash flow has been imbalanced in the first four months of this year, which makes it hard for them to recover faster. Cash flow from airfares and fuel cost reduction has not covered the fixed costs of the airlines.

In order for airlines to overcome the crisis, it is necessary to quickly issue policies on exemption and reduction of state-controlled aviation services (plane parking fees and screening fees, among others), environmental protection taxes for shipping companies, including airlines, to lower costs for air carriers, Saigon Times wrote. 

In addition, the government should also refund value-added tax (VAT) in 2020 for industries directly affected by the pandemic such as aviation and tourism so that the enterprises can cover their operating costs.