Floor airfares undermines competition, insiders say

Monday, Apr 10, 2023 21:07

Mixed opinions arose around a recent proposal about imposing floor airfares for domestic flights. — Photo tinnhanhchungkhoan.vn

Imposing a floor fare for domestic airline tickets would undermine competition in the aviation industry and affect the recovery of the air transport market, insiders have warned.

Mixed opinions arose around a recent proposal about imposing floor airfares for domestic flights, which would be included in the Law on Price.

A representative from carrier Vietravel Airlines was quoted on Saturday that floor airfares would undermine competition, affect the recovery of the aviation market and not follow the market economy.

Vietralvel Airlines said that the application of floor prices for airfares was unprecedented, and no countries in the world managed air tickets with ceiling or floor prices.

Viet Nam currently sets ceiling prices for airfares, which air carriers also seek to remove.

Some countries, such as China and India, removed the regulation about the floor prices of airfares in the 2016-17 period, as floor prices were found to do more harm than good in terms of competitive advantage and tourism development.

Countries in Southeast Asia, such as Thailand, Singapore and Malaysia, let airfares be decided by the markets and adjusted following supply and demand.

Floor prices for airfares must be considered carefully as they go against the development trend of the world, affecting the long-term development of Viet Nam’s aviation industry in particular and the Vietnamese economy.

According to Nguyen Tien Thoa, President of the Viet Nam Valuation Association, the floor prices for airfares would cause damages to passengers first, as many could not enjoy reasonable fares created by competition.

He added that this would also affect the development of relevant industries, including tourism.

Regarding worries over unhealthy competition, if floor prices were not set, Thoa said there was the Law on Competition to regulate this issue.

Economic expert Ngo Tri Long said that the imposition of floor prices for airfares would push up prices of airline tickets, making it difficult for low-income earners to travel by air with reasonable ticket prices and affecting the economic and tourism recoveries.

With six domestic carriers, the three biggest are Vietnam Airlines, VietJet Air and Bamboo Airways, with shares of 35 per cent, 36 per cent and 13 per cent, respectively. It will be necessary to regulate ceiling prices but not the floor prices, Long said.

In 2021, the Civil Aviation Authority of Viet Nam proposed a floor price for airfares at 20 per cent of the ceiling price. However, the proposal was not approved as it was not in line with international practice and went against the global trend and the development of budget airlines.

Take-off/landing services fees not reduced this year

The fees for take-off and landing services of domestic flights would not be reduced this year as the Ministry of Transport said that it lacked grounds for reductions.

The ministry said that the domestic air transport market was recovering to the pre-pandemic levels, citing forecasts of the Civil Aviation Authority of Viet Nam that the domestic transport volume was expected to reach 45.5 million passengers, up 5 per cent compared to 2022 and 22 per cent compared to 2019.

The revenue from take-off/landing services fees would be used to maintain and repair aviation infrastructure assets. The ministry said that capital sources for the maintenance and repair of aviation infrastructure assets remained limited.

Deputy Minister of Transport Le Anh Tuan asked the Airports Corporation of Viet Nam to re-evaluate the current conditions of airports to develop appropriate repair and maintenance plans.

Previously, some domestic carriers proposed to the Ministry of Transport to continue reducing 50 per cent of take-off/landing fees for domestic flights in 2023.

The reduction would help airlines to overcome the difficulty as the international air transport market had not recovered. The recovery of the international air transport market was just 30 per cent of the pre-pandemic level.

Airlines are under pressure of rising fuel prices with the economic crisis and inflation risks, making 2023 a difficult year for the Viet Nam aviation industry. The international air transport market was forecast to recover to 80 per cent of the pre-pandemic level this year, but airlines still anticipated losses.

The policy of reducing take-off/landing services fees was applied in the 2020-21 period as support to domestic carriers to overcome the difficulty caused by the COVID-19 pandemic. Air transport was the most heavily hit sector by the virus. — VNS

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