Vietnam Airlines proposes floor price for air tickets at 1.54 million VND

The national airline has a similar opinion to Jetstar Pacific when proposing to apply a floor price, and proposed 1.54 million as the lowest price for domestic air tickets.

The above viewpoint was put forward by Vietnam Airlines Corporation in a document commenting on the fare framework sent to the Ministry of Transport at the end of March. Based on the cost analysis of a flight, the airline proposed the lowest economy class fare (floor) for a domestic flight to be 1.54 million VND, the highest (ceiling) to be 4.2 million VND.

Vietnam Airlines also calculated that if ticket prices increase by 5% compared to current prices and apply the floor price as proposed, it is estimated that revenue will increase by about 2,500 billion VND after 1 year of implementation.

Before the information from Vietnam Airlines, the proposal to apply a floor price for domestic air tickets had received mixed opinions from airlines. Accordingly, Jetstar Pacific also proposed that the Civil Aviation Authority apply a floor price from 0.6 million to 1.2 million VND depending on the flight route. On the contrary, Vietjet Air disagreed, saying that the regulation of the floor price for domestic air tickets in any form is not in accordance with the provisions of the Competition Law 2014. Moreover, the regulation of the floor price for passenger transport services is no longer popular in the world.

In a document sent to the Civil Aviation Authority, Vietnam Airlines also said that the airline is applying 13 different airfare ranges for each domestic route, including 2 ranges for business class and 11 ranges for economy class with different applicable conditions. "Regulating the floor price for economy class passenger transport services on domestic routes will limit the competition opportunities of low-cost airlines through reducing service costs. This means creating unequal competition between low-cost airlines and other airlines," Vietjet representative analyzed.

For example, the flight from Hanoi to Ho Chi Minh City, the highest price applied for economy class (class M) is 3.15 million VND (about 98% of the ceiling price), the lowest price applied for class E is 1.15 million, class P is 0.8 million VND (about 25% of the ceiling price).

Various prices are offered simultaneously on the domestic flight network with rates changing according to market demand: during peak season, many peak flights are offered at high prices. During low season, many low-demand flights are offered at low prices, customers who buy far away can buy at lower prices than those who buy close to the date...

In 2016, 4% of Vietnam Airlines customers bought business class tickets, 9.6% bought M class tickets (currently the highest price), 40% bought the lowest price, and the remaining 46% bought other prices.

40% of Vietnam Airlines customers buy the lowest fare.

Regarding the need to increase the ceiling price, Vietnam Airlines explained that fuel prices and USD exchange rates are on the rise, causing the average fee per seat to be higher than in September 2015. In addition, Vietnam Airlines has invested in a new modern fleet of A350/B787 aircraft, along with investing in improving service quality to 4-star standards and plans to deploy special economy service compartments. Maintaining a wide price range combined with flexible price openings is explained by the airline to optimize revenue, helping the average revenue per domestic passenger to remain higher than the average cost. However, this number tends to decrease over the years. Specifically, the average revenue spent per passenger in 2013 was more than 1.63 million VND, in 2014 it was more than 1.58 million VND and decreased to 1.48 million and 1.3 million VND respectively in the following 2 years.

Therefore, the airline believes that if considered from a cross-section of ticket price comparison, the ceiling adjustment is consistent with the general trend of the industry and applying a floor price of more than 30% of the ceiling price is reasonable.

Previously, in the draft on the maximum price range for basic economy class passenger transport services on domestic flights, the Civil Aviation Authority proposed that the ceiling price for economy class air tickets would increase by 7-16%, equivalent to 110,000-600,000 VND, depending on each flight route group.

According to Mr. Lai Xuan Thanh - Director of the Civil Aviation Authority, this agency is in the process of receiving comments on the draft airfare framework, the proposal for the floor price is from the business. The Authority has not yet submitted this proposal or any document to the Ministry of Transport on the issue of applying the floor price for domestic airfares.

According to VNE