Floor prices for air tickets will hurt passengers: experts

The floor price will exclusively create advantages for Vietnam Airlines, eliminating competition and forcing passengers to select the national flag carrier in the mid- and high-end segments, said aviation expert Nguyen Thien Tong.

He was referring to a Vietnam Airlines proposal to apply a floor price of VND414,000–1.4 million ($18–61) for all flights depending on distance.

The national flag carrier said having minimum fares would ensure fair competition among airlines and help them overcome hardships caused by the Covid-19 pandemic, adding that they could be scrapped once the aviation industry recovers.

However, Tong said that in recent years, the aviation market has become vibrant with the entrance of private companies offering competitive prices, giving more people a chance to fly.

With the Transport Ministry only having fixed ceiling prices and not floor prices, low cost airlines like Vietjet and Pacific Airlines often offer ticket prices as low as zero dong or under VND100,000, excluding taxes and fees.

Vietnam Airlines’s minimum fare proposal will likely put an end to such promotions. With the proposed floor prices, a two-way ticket between Hanoi and Ho Chi Minh City will see prices up by at least 20 percent to VND2.4 million.

Economist Bui Trinh also said the proposal would hurt customers.

"The tourism sector expects a recovery post-pandemic, but higher air fares will increase tour prices, which goes against the government’s intentions to boost travel," he said.

Another economist, Ngo Tri Long, also said minimum fares should not be applied. However, authorities should consider Vietnam Airlines’s request to up ceiling fares by VND50,000­–250,000 to help carriers recover from Covid-19 impacts, he added.

Nguyen Tien Thoa, chairman of the Valuation Vietnam Association, said to increase ceiling prices, the carrier needs to prove that its costs have increased and pushed up the final price.

The government has already supported airlines with a 30 percent reduction on fuel tax from mid-2020 till the end of this year, and Vietnam Airlines alone has received a VND4 trillion loan from banks for zero interests, therefore the minimum fare proposal should be considered carefully, he added.

Vietnam Airlines had made in similar proposal in 2017, but it was rejected by the transport ministry. Budget carrier Vietjet had said then that such a provision would go against market competition regulations and create unfair competition for low-cost carriers.

A VnExpress survey of nearly 3,800 readers on April 5 and 6 showed that 93 percent did not support the floor price proposal.