Efforts to find solutions to cool down airfares

Many reasons

Mr. Nguyen Bac Toan, Deputy General Director of Vietjet, said that there are 5 reasons for the increase in airfares: Due to the shortage of aircraft and spare parts due to the broken supply chain after the COVID-19 pandemic; Aircraft engine manufacturers require airlines to repair aircraft errors, causing some aircraft to be grounded, reducing 15 - 20% of aircraft; Fuel costs account for 40 - 50% of operating costs of airlines, while gasoline prices have increased by 20 - 25%. In addition, the pressure to replace environmentally friendly fuels; political fluctuations in regions around the world put pressure on airlines, when our region has up to 85% of costs using foreign currency; high-quality human resources for the aviation industry have decreased; finally, customer demand and spending on the aviation industry have decreased...

Mr. Dang Anh Tuan, Deputy General Director of Vietnam Airlines, also admitted that airfares have increased by an average of 15-20%. However, the current increase is still far from the ceiling price set by the government. The current ticket price is only about 76% of the regulated price, with some routes only 43% of the regulated price.

According to Mr. Dang Anh Tuan, the reason for the increase in airfares is primarily due to the 76-77% increase in fuel and aircraft costs. These costs are beyond the control of not only Vietnam Airlines, but also other airlines. For example, with gasoline, compared to 2019, the price of gasoline this year increased by VND5,700 billion and the cost of fluctuating exchange rates increased by VND4,700 billion. The total increase due to fuel costs is about VND11,000 billion. This increase is beyond the control of Vietnam Airlines as well as all airlines.

In addition, geopolitical conflicts and broken supply chains also cause many problems and costs for airlines. Specifically, in the past, it took about 150 days to repair an aircraft under warranty, but now it takes 200 - 300 days, even 1 - 1.5 years. The extended maintenance period also increases operating costs...

"In addition, the current cost of renting an aircraft has doubled but it is also very difficult to rent. In fact, Vietnam's aviation operating capacity has decreased significantly as airlines such as Bamboo and Pacific are having to restructure their operations. For Vietnam Airlines, manufacturers are recalling aircraft for maintenance, about 10% of the aircraft in operation (12 aircraft), the situation is similar to Vietjet. This shows that the transport capacity of the aviation industry has decreased sharply this year. To better serve customers, we are operating at almost full capacity, working day and night. Thanks to that, the occupancy rate is very high and even higher than in previous periods," Mr. Tuan shared.

Agreeing with the previous statements of representatives of Vietnam Airlines, Vietjet and Vietravel at the Conference, Mr. Truong Viet Cuong - Deputy General Director of Bamboo Airways said that the airfares of all airlines have increased recently, but they have always complied with regulations and have not exceeded the ceiling price as prescribed by the Ministry of Transport. This has been checked by the Civil Aviation Authority of Vietnam and reported to the Ministry of Transport in mid-May.

“However, airlines’ compliance with the State’s fare regulations has not yet met customers’ expectations. Because customers always want cheaper fares,” said the Deputy General Director of Bamboo Airways.

The number of aircraft in the domestic aviation industry has now decreased from 230 to 160-170. Operational capacity has decreased by 25-30% compared to before. Meanwhile, input costs of airlines have increased; the financial health of airlines has weakened since the pandemic, and debt pressure is heavy...

“Therefore, to be fair and ensure that airlines can maintain operations, we need to find a reasonable airfare solution that the market can accept, not the cheapest fare,” said Mr. Truong Viet Cuong.

Analyzing the costs affecting airfares, Mr. Truong Viet Cuong said there are 3 major cost groups.

The first group of costs, accounting for 55-60% of total input costs, are aircraft rental costs, engine repairs, foreign currency costs, etc. These are all costs that airlines cannot influence and must accept according to the world's common level. Unfortunately, these costs are currently tending to be disadvantageous to airlines as they are all increasing very high.

The second group of costs is taxes and fees according to regulations. Companies pay according to the state's unit price and have no ability to influence.

The third group of costs is operating costs such as labor costs, aircraft service costs, etc. Airlines are trying to optimize these costs, but they do not have much impact on ticket prices. "Salary accounts for less than 10% of total costs, even when aviation workers work without pay, it does not have much impact on costs," said the Deputy General Director of Bamboo Airways.

Analyzing the Hanoi - Ho Chi Minh City route, Mr. Truong Viet Cuong said that the flight time has gradually increased from 1 hour 40 minutes to 2 hours 10 minutes because the planes have to wait a lot due to the high density of operations at the two airports. The increase in flight time has caused the cost to increase by about 10%. Obviously, the operating cost group, although airlines try to manage, is still difficult to optimize.

On the other hand, also on the Hanoi - Ho Chi Minh City route, the average ticket price is 1,160,000 VND excluding taxes and fees, equivalent to 51.8% of the ceiling price of 3,200,000 VND. During the peak period of Lunar New Year, it is 1,900,000 VND, equivalent to 59% of the ceiling price. Even when the ceiling price is raised, the average ticket price of Bamboo Airways even decreases, equivalent to only 51% of the ceiling price. "Therefore, it is not true that every time the ceiling price increases, the airline increases ticket prices," affirmed the Deputy General Director of Bamboo Airways.

Need cooperation

According to airline representatives, despite the high airfares, the "health" of the airlines is still very serious. For example, although Vietnam Airlines announced a return to high profits in the first quarter of 2024, it was not due to the increase in airfares, but largely due to the elimination of more than 3,000 billion VND in debt from Pacific Airlines (a subsidiary) paying off all aircraft to creditors, as well as liquidating and selling fixed assets and promoting the exploitation of international routes.

Similarly, Bamboo Airways is still struggling in the restructuring process, from a fleet of 30 aircraft now reduced to only 7-8 aircraft, forced to stop operating less effective routes. Pacific Airlines also returned all aircraft since the end of March...

However, according to Mr. Truong Viet Cuong, in recent times, Bamboo Airways has always strived to bring opportunities to buy tickets at reasonable prices to passengers by implementing many incentive and promotional programs. In the whole year of 2023 and the first 4 months of 2024, Bamboo Airways has about 70 discount programs.

Currently, Bamboo Airways is implementing a Midnight Sale promotion program with an 8% discount for all economy class fares, open weekly on the Bamboo Airways website and app from 10pm on Friday/Saturday/Sunday to 2am the following day. The program lasts until March 31, 2025 (not applicable during peak periods and holidays). In addition, Bamboo Airways plans to implement the "Hello Autumn" program during the low season from September 5, 2024 to the end of the year on some routes, with prices starting from only 199k (excluding taxes and fees and not applicable during peak periods and holidays).

To support airlines, Mr. Truong Viet Cuong proposed that the Government consider: Reducing flight operation and landing fees in 2024 - 2025 for domestic flights; adjusting and reducing fuel taxes; providing support such as exempting landing and take-off fees, night flight surcharges; flexibly adjusting ceiling prices according to world fuel prices to be fair to both airlines and consumers...

In addition, the Deputy General Director of Bamboo Airways also expressed his hope that the press agencies would coordinate to explain and provide clear data so that consumers can understand and have a correct view of the nature of airfares.

Sharing this view, Mr. Dang Anh Tuan, Deputy General Director of Vietnam Airlines, said that the unit is always trying to do better than what is currently being done to reduce airfares. Specifically, the airline is trying to reduce costs by about 10% compared to the present to help cool down airfares. However, cooling down airfares does not only depend on the aviation industry but requires a comprehensive solution from many sides: managers, airlines, tourism, businesses... to achieve the best results.

From a local perspective, Mr. Tran Van Linh, Head of Tourism Management Department of Kien Giang Province Tourism Department, shared that in the structure of airfares, airline fares only account for about 50 - 60%, the rest is the cost of many other stages. Therefore, to cool down airfares, first of all, related units need to cooperate closely, attract passengers to fill flights. Related units need to share harmoniously to reduce costs, not just the airline.

“

According to the announcement of the results of the inspection of ticket sales activities of 4 airlines that the Civil Aviation Authority has just reported to the Ministry of Transport, all airlines comply with the airfares of Circular 17 and Circular 34 on domestic routes; at the same time, they strictly follow the regulations on listing and declaring prices as prescribed.