Specifically, Circular amending the basic economy class passenger transportation service fare framework. Routes with distances below 500 km have a maximum price of 1.6 million VND/ticket/leg for socio-economic development routes and 1.7 million VND/ticket/leg for other routes.
The remaining route groups will experience a price increase ranging from 50,000 – 250,000 VND/ticket/leg compared to the old regulations, depending on the length of each route.
The maximum price includes all passenger costs for an airline ticket, excluding value-added tax and surcharges for airports (including passenger service charges and passenger security fees, luggage fees; additional service fees).
Under Circular 34 of the Ministry of Transport, starting from March 1st, domestic airfare ceilings will increase. Illustrated photo.
According to the review by the Civil Aviation Administration of Vietnam (Ministry of Transport), the proposal for increasing domestic airfare is due to changes in the price formation factors for tickets, especially the increase in fuel prices and the exchange rate.
Updated data from the International Air Transport Association (IATA) shows that the price of Jet A1 fuel in the Asian region in June 2023 was 85.4 USD/barrel.
According to calculations by the Civil Aviation Administration of Vietnam, with the assumption that the fuel cost accounts for 39.5% of the total cost, and other cost factors remain constant, with the fluctuations of the Jet A1 price and the USD/VND exchange rate, the fuel cost in June 2023 for airlines increased by 23.1% compared to September 2015. The impact of fuel prices resulted in a 10.9% increase in total costs compared to August 2015.
The Civil Aviation Administration has received opinions from Vietnam Airlines, Vietjet, Pacific Airlines, and Bamboo Airways regarding the increase in 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 (the time when the current fare ceiling is applied) increased by about 85% from 67.3 USD/barrel to 124.4 USD/barrel, resulting in a 30.5% cost increase for the airline.
In addition, more than 70% of air transportation costs are in foreign currencies, while ticket sales revenue in Vietnam is in VND. The exchange rate increased by 6.6% from 2015 to 2022 (increasing on average from 21,900 VND/USD to 23,350 VND/USD), resulting in a corresponding 4.3% increase in the airline’s costs.
Therefore, Vietnam Airlines’ passenger transportation costs in 2022 are 2,769 VND/passenger/km, an increase of 43% compared to the costs in 2015 (1,933 VND/passenger/km).
