CAAV considers applying floor price for domestic airfares
CAAV considers applying floor price for domestic airfares
The transport ministry has instructed the Civil Aviation Authority of Vietnam (CAAV) to study the proposal for applying a floor price for domestic air tickets.
At a press conference in Ha Noi on Wednesday, deputy minister Nguyen Hong Truong said the aviation market was growing strongly and diversifying, owing to the participation of foreign private businesses, so the ministry needed to consider this issue from every angle. The conference was to review the ministry’s operations in the first quarter and its work for the second quarter.
The CAAV will study and gain aviation management experience from other countries so as to create conditions locally that encourage people to fly, by offering reasonable prices while ensuring that airlines do not suffer losses, Truong said.
The ministry will take a decision on the floor price soon, he added. “The most important thing is to have a method that corresponds, ensures competitiveness as well as meets the airlines’ operation costs. The carriers’ profits should come from their quality services rather than through hike in ticket prices,” the deputy minister said.
To offer better services while keeping ticket prices down and making profits, carriers will have to cut costs, Truong said. The transport ministry is currently downsizing the workforce in airlines, air traffic management units and airport ground service companies as the salaries here are quite hefty. If businesses fail to cut costs, air ticket prices will have to bear the high expenses.
CAAV director Lai Xuan Thanh said the decision on whether or not to apply a minimum price for domestic air tickets would be based on what the law says, especially the Law on Civil Aviation, the government’s management orientation, and the operational reality of airlines.
Thanh said the Law on Civil Aviation 2006 had regulations on price frames, which means on both ceiling and floor prices. The revised 2014 law also allows for the fixing of ceiling and floor prices. “But it’s not enough grounds to give an official answer on the floor price to the public. We need more time to listen to people’s ideas and opinions,” Thanh said.
On March 17, the transport ministry held a conference to gather ideas and opinions from airlines for a draft decision on price ranges for economy-class fares for domestic flights, which is expected to replace the finance ministry’s Decision 3282/QD-BTC issued in December 2014, regulating the ceiling for economy-class fares for domestic routes.
Several airlines, including Jetstar Pacific (JPA), have agreed with the draft decision. JPA also proposed that the decision should incorporate floor price, while low-cost airline Vietjet (VJ) did not want a floor price as it said that would reduce market competitiveness.
Truong said the ministry must put the interests of the people ahead of the interests of the airlines. The important thing is to come up with a reasonable method, ensuring competitiveness, profits and quality service.
