Why Are Air Tickets So Expensive? A Comprehensive Analysis by Vietravel Corp’s Chairman
At the seminar “Can We Cool Down Airfare Prices?” hosted by Thanh Nien newspaper on May 17th, Mr. Nguyen Quoc Ky, Chairman of Vietravel Corp – a company operating in both aviation and tourism, offered an in-depth analysis of the reasons behind soaring airfare prices and addressed public concerns, including why traveling to Thailand is cheaper than domestic flights.
Airlines Rely on Ancillary Services for Profit, While Flying Itself Incurs Losses
To uncover the root cause of high airfare prices, Mr. Ky emphasized that Vietnamese airlines are currently engaged in contract flying, lacking ownership of core technologies.
“Even if we purchase aircraft and base them in Vietnam, we are at the mercy of the manufacturer when it comes to engine issues. We can’t just fly whenever we want. We have customers, markets, service crews, and airports, but we don’t have control over the means of flying. Even the software for selling air tickets is foreign-made.
In any industry, if you don’t own the core technology, it’s normal to be at the mercy of others. A slight increase in fuel prices can make us anxious. Airlines have to rely on ancillary services for profits because flying itself is currently unprofitable,” the Chairman candidly shared.
Citing the Global Trend report by FCM Consulting, Mr. Ky revealed that economy-class airfares worldwide in 2023 increased by 17-25% compared to 2019 pre-pandemic levels, with Asia seeing a 21% jump. The global trend for 2024 indicates a further rise of 3-7%.
“So it’s not just Vietnam experiencing this hike; it’s a global phenomenon. Airfares from here to the US have never been higher. Business-class tickets that once sold for $3,000-$4,000 now cost $9,000-$11,000, double the previous price. For economy class, tickets that used to be around $750-$900 are now $1,700-$2,100, depending on the timing,” he illustrated.
According to Mr. Ky’s calculations, the Vietnamese market is short of about 45-50 aircraft, considering the three major airlines: Vietnam Airlines, Vietjet, and Bamboo Airways. The entire market has approximately 270 aircraft. Despite a decrease in market load, post-pandemic demand has surged as people seek “healing trips.” Everyone also desires faster, less tactile, and safer travel, boosting air travel demand.
Why Is Traveling to Thailand Cheaper than Domestic Destinations?
Regarding the impact of aviation on tourism, Mr. Ky expressed his sadness when reading comments blaming high airfares for deterring tourists from visiting certain destinations.
“Many localities manage their attractions well, but we must acknowledge that poor management in some places discourages tourists. The tourism industry in Ba Ria-Vung Tau, for example, soared during the summer because they successfully cleaned up their beaches.
Attracting tourists is a combination of many factors because tourism is a comprehensive economic sector, not a specialized one like aviation. So, saying that high airfares are the sole reason for a decline in tourism is like touching only one foot of an elephant without considering the entire animal,” asserted the Chairman of Vietravel.
To address the issue of airfare prices, Mr. Ky suggested that localities could consider providing support to airlines when opening new routes to their area. He also recommended closer collaboration between airlines and travel companies and an increase in charter flights to optimize flight times and market demand.
Additionally, he pointed out that accommodation, transportation, and service providers offer their products at full price to travel companies, making it challenging to sell packages.
“In Vietnam, we lack integrated products that bundle accommodation, transportation, and services into one package. Traveling abroad is only cheaper in Thailand because they have a ‘4-in-1’ policy, where one party takes the payment and then distributes the profits to the others. They sell below cost but make up for it through shopping and other services. Their tourism industry excels in this regard,” Mr. Ky explained.
“Let’s stop blaming each other and come together to resolve this issue,” he concluded.
