Vietnam may remove airfare cap as market becomes 'competitive': official

The airline market has become very competitive with multiple players and it is time for the government to give businesses their freedom, Lai Xuan Thanh, chief of the Civil Aviation Authority of Vietnam (CAAV), is quoted as saying by the government website on June 29.

The airfare ceiling was introduce to protect passengers, Thanh said, without giving any timeframe for a removal. 

He promised that his agency will continue to keep a close watch on air ticket prices offered and "only intervene when airlines collude to increase prices."

A one-way economy ticket for a domestic flight cannot cost more than VND3.75 million (US$165). The government adjusted that cap down by 4 percent last September in response to falling fuel costs. 

In a recent letter to the aviation authority, national carrier Vietnam Airlines tried to lobby for the price cap to be scrapped, describing it as unnecessary. 

It argued that most tickets now cost much less than that maximum level, with the exception of some routes. 

While it is still the biggest play in the domestic passenger air market, Vietnam Airlines has been facing increasing competition from private low-cost Vietjet Air. Their respective market shares are 40.8 percent and 36.3 percent, according to latest figures.

Jetstar Pacific Airlines, another low-cost carrier run by Vietnam Airlines and Australian-owned Qantas, controls 14.9 percent. The national airline's short-haul carrier VASCO owns the rest.

It remains to be seen if the competition among Vietnam Airlines and Vietjet can keep prices from increasing. Some believe airfares will rise this year anyway due to an increase in airport fees.

State-controlled Airports Corporation of Vietnam, which manages 22 airports around the country, reportedly will seek the transport ministry's permission to increase service fees for domestic flights such as runway and passenger surcharges.

The corporation expects increased revenues to help it upgrade the airports over the next two years at an estimated cost of more than VND26.2 trillion ($1.16 billion).

Vietnam's air market is forecast to see a rise of 19 percent to 45 million passengers this year.