Airlines propose scrapping airfare caps

Airlines and some experts have proposed hiking and eventually removing domestic airfare caps to support businesses in difficult times.

Last year, no domestic airlines were profitable because of higher fuel costs, foreign exchange rates, and interest rates, while airfare caps have been kept unchanged for eight years. On Friday, participants at a conference on supporting the aviation industry said that the caps should be removed.

Trinh Ngoc Thanh, executive vice president of Vietnam Airlines, said domestic airfare caps were last adjusted in 2015.

The current maximum fare is VND2.2 million ($96) for routes under 850 kilometers and VND3.75 million for those above 1,280 kilometers.

Airfare caps are placed only on domestic routes, not on international ones. As a result, the highest airfare of domestic flights is sometimes 40% lower than that of the HCMC – Singapore route, Thanh said.

Thanh and Nguyen Manh Quan, CEO of Bamboo Airways, proposed that the Ministry of Transport hike the airfare caps and then eventually scrap them to ensure the aviation industry’s sustainable development.

Quan also proposed the State still apply airfare caps on routes operated by only one airline, but let the market self-regulate routes tapped by at least two carriers.

Hoai Nam, a Vietnam Tourism Advisory Board member, said: “Removing the airfare caps will help domestic airlines improve revenues and profits during peak periods.”

He said that at present, no other countries in the world apply airfare caps, and none of the five domestic airlines has a monopoly position, so the caps should be removed as soon as possible.

However, if the caps are scraped, airlines must not negotiate with one another about airfares, seriously violating the Competition Law and affecting the interests of passengers, Nam added.

Tran Tho Dat, a member of the prime minister’s Economic Advisory Group, suggested the management agency should come up with a formula for regulating airfares like that for retail prices of gasoline and oil products.

“If there are no caps, we should create a formula, an open airfare range, to ensure fair competition and people’s interests,” he said.

In 2021, the Civil Aviation Administration of Vietnam proposed removing airfare caps on routes operated by three airlines or more to increase competition by service quality to serve passengers who are willing to pay higher than the ceiling price.