Finance Ministry evaluating minimum airfare policy

Minister of Finance Ho Duc Phoc told a meeting with lawmakers Thursday that if a low-cost airline offers tickets of for VND0, VND200,000 ($8.53) or VND500,000, they will not accrue enough revenues to pay for jet fuel, let alone paying staff and other expenses.

This means that eventually low-cost carriers could beat out professional airlines entirely and dominate the market and its profits exclusively, he added.

Phoc was commenting on a proposal by Pham Van Hoa, a lawmaker from the southern province of Dong Thap, who suggested that a minimum airfare level be implemented.

Although a VND0 ticket price will benefit passengers, it will not create healthy competition between carriers, he said.

Regarding the airfare cap, Hoa said such a cap should not be a cause for alarm. He added that airlines have been losing money because of the effects of Covid-19, not because prices are being regulated.

If the airfare were a problem no new investor would join the industry in the first place, he said.

But lawmaker Nguyen Thi Phu Ha, a member of the National Assembly’s Finance Committee, proposed that the airfare cap be removed as government policy adjustments often lag behind market developments and can create challenges to businesses, which eventually bring down revenues from taxes.

The cap also is not in line with international practices and is unfair as other types of transportation such as roads or trains do not have price caps, she added.

The Ministry of Finance and the Ministry of Transport, however, has been arguing that the cap is needed to give the government a tool to control the market in case carriers bring prices up too high, especially on routes that have limited competition.

The cap could protect consumers and safeguard society from negative impacts.

The Ministry of Transport plans to increase the domestic air ticket price ceiling in Vietnam by an average 3.75% later this year.