While economists fear having lower limits for airfares will distort competition, some airlines worry safety is at stake. If fares do not make up even the fuel costs of a flight, aviation safety would be affected, Dang Ngoc Hoa, chairman of Vietnam Airlines, said at a meeting held on Monday to get feedback from economists on proposed minimum fares.
The Civil Aviation Administration of Vietnam (CAAV) has proposed minimum fares of VND320,000-VND750,000 ($14.06 – $32.95) for domestic flights between November 1 and October 31 next year to help airlines overcome the difficulties caused by the Covid-19 pandemic.
Too low prices would weaken all airlines, Hoa said. Many countries like China and India have floor prices for air tickets, he pointed out.
He said amid the pandemic fares are very low at just 40 percent of those in 2018-19, and 250 airplanes are parked in airports, some of which are running out of parking space.
But despite the low fares, airlines have to keep operating to maintain parking space, minimum cash flows and planes, he said.
During the first Covid outbreak in March 2020, there were three flights a day in total, while during the fourth wave starting in April 2021, especially July-August, “there were no flights”, he said.
All carriers have been hit and most airlines are facing losses, he said.
Vietnam Airlines made a loss of VND7 trillion ($301.7 million) in the first half of the year, while private airlines reported losses of a trillion dong, he added.
But despite his impassioned argument, economists at the meeting said minimum fares are not acceptable.
Can Van Luc, chief economist of BIDV, said floor prices could cause confusion and be unfair to both state-owned and private enterprises, and even violate the Law on Prices and the Law on Enterprises.
Nguyen Sy Dung, former deputy head of the Office of the National Assembly, said: “it is unfair to impose a floor price on air tickets”.
If minimum fares are applied, a three-star airline must sell at the same price as a five-star airline, and no customer would spend money to travel in the former, he pointed out.
“We might kill an airline through price policy. It’s unacceptable”.
In a recent communication to the Ministry of Transport, three airlines agreed to apply floor prices airfares while two others disagreed.
The Department of Transport admitted that since costs and services are not comparable, it would be difficult to determine common minimum fares applicable to all airlines.
In the first seven months of this year Vietnamese carriers carried 13.7 million passengers, down 57.7 percent from the same period in 2019.