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Vietnam asks airlines to slash ticket prices as fuel costs plummet

Monday, September 07, 2015, 10:33 GMT+7
Vietnam asks airlines to slash ticket prices as fuel costs plummet
A plane is seen refueling at Tan Son Nhat International Airport in Ho Chi Minh City.

Passengers could anticipate simultaneous airfare cuts by carriers in Vietnam in the near future as the country’s aviation watchdog has insisted that ticket prices be slashed in accordance with the falling fuel costs.

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Airlines should offer more cheap-tickets and promotional programs to create more conditions for people to travel by air, the Civil Aviation Authority of Vietnam (CAAV) said in a fiat signed by deputy director Vo Huy Cuong.

Fuel costs normally account for 39.5 percent of the total expenditure of a carrier, so lower jet fuel prices mean less input expenses, according to a CAAV representative.

As jet fuel prices began plunging late last year, the Ministry of Finance has lowered the ceiling for airfares of the economy class on domestic flights from VND5,000 per passenger per kilometer to VND4,250, starting January 1 this year.

The price of Jet A1, the most commonly used fuel for commercial aviation, in Asia averaged US$57 a barrel in August, or a 32.7 percent drop against the $84.7 a barrel rate recorded in December 2014, according to data obtained by Tuoi Tre (Youth) newspaper.

Representatives of some airlines confirmed to Tuoi Tre on Sunday that the lower fuel costs will affect the airfares of their domestic services in the future.

The current plane ticket prices for domestic services are in fact 15 to 18 percent lower than those of this time last year, they added.

Airlines see the falling jet fuel prices as a chance to increase their competitiveness with the airfare cuts.

“Carriers currently keep the average prices of [domestic] services at relatively low rates due to competition pressure,” Le Hong Ha, CEO of no-frills carrier Jetstar Pacific, told Tuoi Tre.

In 2014 a ticket for the Ho Chi Minh City – Hanoi service, one of the busiest among Vietnam’s domestic routes, cost around VND1.1-1.2 million ($49-54), but the fares in late August and early September 2015 are only VND750,000-800,000 ($33.48-35.71), Ha revealed.

“The fuel cost for this two-hour service is as high as VND450,000-500,000 [$20-22] a ticket,” he added.

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