The Ministry of Transport: Adjusting the ceiling price and the floor price of air tickets must be in line with the actual conditions

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The story of the ceiling price and the floor price of the plane ticket is getting the attention of the public when the Vietnam National Airlines – Vietnam Airlines in a recent meeting petitioned the Civil Aviation Authority of Vietnam to consider adjusting the ceiling price and air ticket floor price.

Bộ Giao thông Vận tải: Điều chỉnh giá trần, giá sàn vé máy bay phải phù hợp điều kiện thực tế - Ảnh 1.
Vietnam Airlines ticketing counter at Chu Lai airport, Quang Nam. (Photo: Song Ngoc).

On April 7, talking to Vietnam News Agency reporter on this issue, Deputy Minister of Transport Le Anh Tuan said that the opinion of the Ministry of Transport is the adjustment of the floor price or the ceiling price for Air fares must not violate the provisions of the Competition Law and the Law on Price. This adjustment must be based on the suitability of the actual conditions in order for people to enjoy the benefits.

Also according to Deputy Minister Le Anh Tuan, on the issue of airfare, the point of view of the Ministry of Justice agrees with the Ministry of Transport that everything must comply with the law to create equal competition for enterprise.

However, Deputy Minister Le Anh Tuan said that when an airline provides a service that requires a higher cost, namely higher input parameters, it is completely recommended to adjust the price bracket. Thereby, will create many products and services.

“Currently, the Ministry of Transport is also studying and considering adjusting a number of provisions in Circular 19/2020 / TT-BGTVT on rates and price brackets for specialized aviation services at airports. The point of view of the Ministry of Transport is to consider adjusting towards diversifying products offered to passengers, so that people can enjoy a variety of services “, Deputy Minister Le Anh Tuan emphasized.

Referring to the proposals of Vietnam Airlines on ceiling and floor prices, Deputy Minister Le Anh Tuan affirmed that the Ministry of Transport has not received a proposal for price bracket adjustment from Vietnam Airlines.

However, with the current Vietnamese aviation market with the participation of many private airlines, the price adjustment should follow the market mechanism. The legal framework already stipulates that this issue should be applied and implemented in accordance with the regulations.

However, Deputy Minister Le Anh Tuan also emphasized that the goal of adjusting ceiling and floor prices (air ticket service prices) is to help airlines; in which, Vietnam Airlines provides more products and services for different income groups, not price increases.

For example, passengers who choose to fly beautiful hours, modern aircraft with more services must accept higher fares. If you choose low flight time, less modern aircraft, the price will be softer.

Deputy Minister Le Anh Tuan said that the Ministry of Transport will study and adjust some contents of Circular 19/2020 / TT-BGTVT for all airlines, not just Vietnam Airlines. Of course, when adjusting, it will be necessary to have a meeting to listen to the opinions of the parties. But how to adjust it must also be based on the principle of protecting the rights and interests of the people.

Bộ Giao thông Vận tải: Điều chỉnh giá trần, giá sàn vé máy bay phải phù hợp điều kiện thực tế - Ảnh 2.
Noi Bai International Airport. (Photo: Song Ngoc).

Commenting on the proposal of Vietnam Airlines, many economists believe that if you apply the common floor price to air tickets as proposed by Vietnam Airlines, passengers will lose the opportunity to get cheap tickets and violate the Competition Law.

Associate Professor, Dr. Nguyen Thien Tong, an aviation expert, said that the re-proposal of Vietnam Airlines to raise the ceiling price and apply the floor price is only a private recommendation of this airline. When applying the floor price, there will be no more tickets 0 VND, 49,000 VND … for people to choose cheap travel by air.

The airline is selling low does not mean they are dumping. On a flight, the airline flexibly calculates the number of seats sold at high prices, promotional seats to balance revenue and expenditure and somehow the business is still profitable.

According to Associate Professor, Dr. Nguyen Thien Tong, if the proposals of Vietnam Airlines are approved, passengers will have to fly at high prices, the aviation market will lose its competitiveness, which is not beneficial for consumers.

Assoc.Prof.Dr. Ngo Tri Long, former Director of the Institute of Market Research and Price (Ministry of Finance), said that the legal regulations on prices for the markets still hold dominant positions such as Current aviation market with 2 airlines Vietnam Airlines and VietJet Air accounting for more than 50% market share. That is, there is no real competition, so the state still has to set the ceiling price and not the floor price.

“The reason is that exceeding the ceiling price will be unfavorable to consumers. How businesses want to lower prices depends on the business, only benefiting consumers. The proposal to apply floor prices is absurd, not suitable for market competition”, Mr. Ngo Tri Long emphasized.

Lawyer Le Cao Cuong, Director of An Vien Law Firm (Hanoi Bar Association), said that the lower ticket firms, but without losses, do not have to dumping. In the current period, when airlines have difficulty due to the COVID-19 translation, the application of the floor price is not conducive to consumers and discourages competition. Because a good business can lower its prices and still make a profit, it should not be limited because it benefits consumers.

An economist acknowledged, still knows that airlines are facing many difficulties, even difficult to withstand in the context of the prolonged COVID-19 epidemic and the support of airlines is necessary, but the regulators State governments such as the Ministry of Transport, the Ministry of Finance … need to have appropriate solutions, so people and tourism should not be burdened.

On the other hand, the State is having supportive policies for the aviation industry such as reducing 30% of special consumption tax on jet fuel from mid-2020 to the end of this year. Especially, Vietnam Airlines is also loaned VND 4,000 billion by banks with 0% interest rate from the refinancing source of the State Bank. Therefore, the proposal to increase the ceiling fare of Vietnam Airlines in the current context needs to be reconsidered.

From the perspective of a rookie with participation in the aviation market at the end of 2020, Mr. Vu Duc Bien, General Director of Vietravel Airlines said that when operating under the market mechanism, it is not recommended to interfere with floor prices or ceiling prices, all due to the market. If the floor prices are applied evenly, Mr. Vu Duc Bien believes that traditional airlines such as Vietnam Airlines will prevail. The floor price is equal, there is no difference in price too much so passengers choose to travel cheap airlines.

An expert in the market commented, consumer research shows that the price factor is the strongest decisive factor in consumer demand. The task of service providers during the COVID-19 pandemic is to seriously affect production and business, how to have the most economical and cost-effective management solution to be able to offer stimulus promotion packages with national programs.

According to representatives of Vietnam Airlines, the proposed basis of raising the ceiling price and applying the floor price is a problem for the airline to overcome difficulties during the COVID-19 period, reducing competition. Not only domestic competition, when the market recovers and international airlines enter the market, the internal strength of Vietnam’s aviation will weaken.

Previously, at a recent meeting with the Civil Aviation Authority of Vietnam, Vietnam Airlines proposed to increase the ceiling price from 50,000 to 250,000 VND / person. The floor price is recommended in two options: by 35% of the ceiling price for each distance or the average variable cost of a seat for each distance group of low-cost airlines.

Accordingly, with a distance of less than 500 km, for the group of areas for socio-economic development, it is proposed to keep the ceiling price unchanged, but to apply the floor price of VND 414,000 or VND 560,000 (option of 35% of the ceiling price). As for other groups of areas, the floor price is 414,000 VND or 595,000 VND.

The current ceiling price for the flight group of 500 – 850 km, the ceiling price of 2.2 million VND / ticket is proposed to increase to 2.25 million VND / ticket; 850 – 1,000 km from 2.79 million VND / ticket to 2.89 million VND / ticket; distance 1,000 – 1,280 km from 3.2 million VND / ticket to 3.4 million VND / ticket … With the above distances, the proposed floor price is 570,000 – 787,500 VND / ticket, 755,000 VND / ticket, respectively. 1 million VND / ticket; 804,000 – 1,190,000 VND / ticket.

In addition, Vietnam Airlines continues to propose the need to develop regulations to ensure that the airline is granted more than 50% of the slots (takeoff and landing time) and the franchise is allocated. The airline also wants to be given priority as the first airline to re-operate international destinations to express its national image, while also applying for sale & leaseback with 50% of the aircraft in the fleet.

Source: vietnambiz.vn – Translated by fintel.vn