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Ceiling airfare scheme removed, but airfares remain grounded
Though the ministries of finance and transport have decided to remove the ceiling airfare scheme, national flag air carrier Vietnam Airlines (VNA), Jetstar Pacific Airlines (JPA) and Indochina Airlines (IA) all have announced they will not increase airfares in the immediate time.
Still watching the situation
In principle, since December 16, when the decision on removing the ceiling airfare scheme went into effect, air carriers have had the right to raise airfares. However, airlines all say that it is not feasible to raise airfares now, not even on flights on the Hanoi-HCM City route.
VNA’s Deputy General Director Trinh Hong Quang said that the airline will continue to examine the present situation before making a plan. Prior to that, VNA’s General Director Pham Ngoc Minh affirmed that airfares would not be raised prior to Tet.
Business Director of IA Do Anh Tuan also said that the airline had not made any new plan. Airfares remain at VND1.7mil per trip on the HCM City-Hanoi route, and VND1.1mil on the Hanoi-Da Nang and HCM City-Da Nang routes for the Tet holiday.
JPA’s General Director Luong Hoai Nam also said that JPA has no intention to raise airfares as the air carrier still cannot foresee what the market will look like after Tet. Regarding the new airfare scheme for JPA, Nam said that the air carrier plans to have big gaps between low and high airfares.
Nam said that it is highly possible that the highest airfare on HCM City-Hanoi flights would be $220/ticket/trip. “Passengers will have many choices, and they will have chances to book tickets at lower prices if they book several months in advance,” Nam said.
What will airfares be like?
Analysts believe that airfares will not increase after Tet for three reasons. First, demand will not be high as people will try to reduce expenses. Second, the aviation growth rate is not high. Third, the market will see many more air routes and more airlines with three air carriers operational now, and one, Vietjet Airlines, to join the market in mid 2009.
JPA, IA and Vietjet Airlines have 15 aircrafts which provide nearly 20 flights a day on the HCM City-Hanoi air route. Airlines will have to compete fiercely in order to lure passengers in the difficult period, when the number of passengers may decrease.
It is expected that the crude oil price will not be as high as it once was in 2008, so airfares will not be as affected. Expenses for fuel accounted for 60% of the costs of a flight, while it is now just 30%.
Diversifying airfares will be something airlines will do in the time to come in the competition with each other, according to Nam from JPA.
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Jestar Pacific cuts workforce
JPA’s Luong Hoai Nam said that the air carrier plans to cut 50% of its foreign workforce and 10% of its Vietnamese in an effort to cut expenses.
As of January 1, 2009, JPA will provide land services itself for flights departing from and landing at Noi Bai Airport, which is hoped will help it save $3-4mil a year.
As of January 3, 2009, JPA will offer the Hanoi-Can Tho route with Boeing 737, 4 flights a week. |
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