Travellers proceed at check-in counters at the Cam Ranh International Airport in the south central province of Khanh Hoa. (Photo: VNA) HCM City (VNA) - A Ministry of Transport (MoT) draft law, which iscurrently collecting idea contributions, would enforce a minimum price fordomestic air tickets, a move opposed by fast-growing low-cost carrier VietjetAir.
According to the draft, the State management office would increasethe ceiling price for air tickets as well as set the floor price, which wouldbe the cheapest air ticket price that airlines are allowed to sell.
National carrier Vietnam Airlines and Jetstar Pacific (JPA)agreed with the draft, especially the floor price, while low-cost airlineVietjet (VJ) said no to the floor price.
Vietnam Airlines and Jetstar Pacific commented that regulation for the floor price is inline with the current law on Civil Aviation of Vietnam. The law regulates that“airlines will decide ticket prices for domestic flights in the price frameworkregulated by the Ministry of Transport.”
According to the law, the ticket price framework must includefloor and ceiling prices but due to low competition in the market, the Ministryof Transport has only applied the ceiling price.
Capacity for domestic flights has recently increased 30 percent ayear. That has made airlines continuously reduce their ticket prices, sometimesto even lower than input prices.
This has affected the sustainable development of both airlines andthe aviation industry.
“In some nations, such as Indonesia, the floor price for ticketsis released to prevent price competition,” a JPA representative said.
The JPA representative suggested taking into account all thedirect costs of a flight to calculate a standard floor price. This wouldinclude all expenditure that one airline must pay, including airplane price,petrol, staff, services. The total expenditure for a flight from HCM City-Hanoiwould be around 1.1 million VND (47 USD) and this should be a floor price for aone-way ticket from HCM City to Hanoi.
At present, the ceiling price for the HCM City- Hanoi route iskept no higher than 3.2 million VND (140 USD) for a one-way ticket.
With a different point of view, Vietjet said that the currentaviation market is not a monopoly but rather there is a tough competition amongaviation carriers.
“The Government should manage and supervise aviation ticket pricesthrough the Competitiveness Law and Customer Rights Protection Law rather thanreleasing a floor price,” a Vietjet representative said.
“A floor price for air tickets is not suitable with theCompetitiveness Law 2014,” he added.
Vietjet also revealed that in Vietnam, 90 percent of thepopulation does not have the opportunity to travel by air due to high ticketprices.
“If the floor price is approved, local residents will be limitedin their chance to fly and low-cost airlines will be limited to compete throughits service reduction,” he added.
“Air ticket management with price frameworks for domestic flightsis out of date. The Government should create competition and ensure a healthycompetitive environment. Air prices should be decided by airlines,” Luong HoaiNam, an aviation expert said.
“We should not grant regulations on floor price because the morecompetition, the more benefit customers can get. Vietnam has Competitivenessand Trade Laws to manage all activities of companies,” Nguyen Tien Thoa, deputychairman of the Vietnam Price Appraisal Association said.
“The Government should directly manage prices if one enterprisedominates the market. But in the airline market now, there are fourenterprises. If the Government applies floor and ceiling prices, airlines won’tcompete on price any more,” Dr Ngo Tri Long, former head of the Ministry ofFinance’s Price Management Institute said.
“The domestic airline market has had real competition during thelast four years since Vietjet joined into the market, and that helped to reduceair tickets 50 percent. Despite selling cheap air tickets, Vietjet still makesa profit,” one airline expert said.
Vietjet did not release its average price for the whole year andit adjusted prices at different times. The airline often carries out promotioncampaigns with several million tickets sold at 5,000 VND (22 cents).
After six years of operation, low-cost airline Vietjet has gained41 percent of the domestic market, nearly the same as national carrier VietnamAirlines with 42 percent. Vietjet has improved its competitive ability in airtickets.
Answering the Vietnam News Agency’s question aboutrumours that the Civil Aviation Authority of Vietnam (CAAV), anagency belonging to the MoT, had proposed allowing floor air ticketsales, CAAV director Lai Xuan Thanh rejected this information, notingthat this was only a proposal from an airline.-VNA
VNA
