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Apr 12, 2022 / 16:58

Vietnam's aviation authority wants to raise price ceiling for air tickets

An adjustment in the pricing policy does not mean airlines would raise their price tickets but a basis to manage the prices flexibly.

The Civil Aviation Authority of Vietnam (CAAV) has proposed to raise the price ceiling for air tickets, citing a surge in petrol prices as a reason.

 Vietnam's aviation industry continues to face challenges from geopolitical tension. Photo: The Hanoi Times

Under its report, the CAAV noted geopolitical tensions, especially the Russia-Ukraine conflict, have pushed the jet fuel price of Jet A1 to a new height since the beginning of 2022.

Even when the oil prices showed signs of decline in late march, those of Jet A1 continued to rise, it added.

Data from the International Air Transport Association (IATA) on April 1 noted Jet A1 prices in Asia rose to US$132.63 per barrel and predicted the average price of the commodity in 2022 would be around $121.9 per barrel.

Meanwhile, the CAAV estimated jet fuel prices, accounting for 39.5% of total operating expenses of airlines, would increase by 65% in April against December 2014 and 84% against  September 2015.

This would result in a 28% increase in the total expense of airlines compared to December 2014 and September 2015.

In this context, Vietnam Airlines would bear an additional cost of VND5.7 trillion ($249 million) should the jet fuel price rise to $130 per barrel, and VND9.1 trillion ($397.5 million) for $160 per barrel, which would worsen the financial situation of the flag carrier in 2022.

Other airlines are facing the same issues, with Bamboo Airways having to fork out an addition of VND3.2-4.6 trillion ($140-200 million) for fuel prices of $130-150 per barrel in 2022, and Vietjet Air of VND5.2 trillion ($227 million) for the price of $130 per barrel.

The CAAV, therefore, called for the prices of air tickets to raise by VND2.2-2.5 million for flight distances of  500  to 850 kilometers, and between VND2.79 and 2.89 million between 850 to 1,000 kilometers.

For flights between 1,000-1,280 kilometers and above 1,280 kilometers, passengers are expected to pay an addition of VND3.2-4 million.

The CAAV also noted air ticket prices for flights below 500 kilometers would stay the same.

“An adjustment in the pricing policy does not mean airlines would raise their price tickets, but a basis for them to manage the prices flexibly,” the authority stressed.

CAAV also noted such change would not have significant impacts on the consumer price index in 2022.