Officials lift domestic air-fare cap

Hanoi (VNA) - The ministries of Finance and Transport have decided to remove the 1.7 million VND cap on domestic economy airline tickets.

The decision will allow airlines to set their own prices, based on quality
of service and market supply and demand, while keeping prices reasonable.
They must, however, register fare changes with the two ministries.

According to Circular 103 which published the decision, the cap price of
1.7 million VND for economy class will still be applied to some sole routes
of Vietnam Airlines, the national airline company.

Vietnam Airlines is the sole airline flying on more than 20 domestic
routes, including routes to Dien Bien Phu city, Phu Quoc Island and
Con Dao Island . Vietnam Airlines and Jetstar Pacific Airlines are the
two primary airlines offering services on other domestic routes. Two new
private airlines are expected to enter the market soon -Vietjet Air and
Indochina Airlines.

Vietnam Airlines and Jetstar Pacific Airlines supported the cap lift,
saying that passengers would gain in that while companies could more easily
regulate flight schedules.

Luong Hoai Nam , general director of Jetstar Pacific Airlines, said
that these new regulations would prove far more beneficial than the price
cap.

Nam said that without the price cap, airlines would be able to
diversify fares based on demand and supply of routes according to each
month, day and even hour.

For instance, flights at 9am could be 1 million VND, while more convenient
11am flights would be the costliest, Nam said.

Vietnam Airlines said that the new regulations would partly ease
over-demand on routes from Ho Chi Minh City to Hanoi approaching Tet,
and on the route from Hanoi to HCM City after Tet.

The airline did confirm, however, that they would not increase the fare on
flights around the 2009 Tet holidays, despite the new regulations.

They continued that to meet demand approaching the nation's biggest yearly
festival, they would increase their flight capacity by 33 percent over last
year, between HCM City and Hanoi and between HCM City and Da
Nang . Some, however, expressed concern that the new regulation could lead
to the two airlines to mutually increase their fares.

The Ministry of Finance addressed this concern, saying that air fares
still had to be registered with the ministry. Airlines are required to
register with the two ministries 15 days before applying the new prices.

The two ministries would consider expenses, demand and supply and fuel
prices when deciding to approve the new fares.-Enditem