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Sharp rise in fuel prices prompts airlines to request fare hike

Many Vietnamese airlines have sought permission for fare hike on the ground that the world prices of fuel, which accounts for a big proportion of airlines’ operating expenses, are rising.

Passengers are boarding a Vietnam Airlines aircraft. (Photo: VNA

Passengers are boarding a Vietnam Airlines aircraft. (Photo: VNA

A number of domestic carriers, including Vietnam Airlines and Vietjet Air, have submitted a request to the Civil Aviation Authority of Vietnam (CAAV) to raise their ticket prices, citing statistics of the International Air Transport Association (IATA) that average jet fuel prices in August this year has went up 33.5 percent from one year ago.  

According to the CAAV, the current air fare framework was calculated based on the price of Jet A1 fuel in December 2014 which stood at around 84.7 USD per barrel, plus import tax of 7 percent and environmental protection tax of 1,000 VND (0.043 USD) per litre. 

Meanwhile, a barrel of Jet fuel in Asia and Oceania this August fetched 86.7 USD, plus 7-percent import tax and environmental protection tax of 3,000 VND (0.13 USD) per litre.

At the annual shareholders’ meeting recently, Vietnam Airlines announced that the fuel costs make up about 30 percent of the carrier’s operating expenses and even hit 38 percent at peak time. For each US dollar increase in fuel prices, the national flag carrier will see a rise of about 230 billion VND (9.85 million USD) in annual expenses.

According to the representative of another airline, the recent fuel price hike has resulted in an increase of around 16.7 percent in operating costs compared to September 2015, not to mention the extra costs caused by changes in foreign exchange rates, such as wage for foreign pilots or leasing aircraft. Therefore, it is necessary to raise the ticket prices, he said.

However, the CAAV has proposed to maintain the current ceiling to keep a lid on inflation this year and it will be reviewed next year if the situation at that time proves necessity.

Contrary to complaints on the fuel rise, domestic airlines reported impressive business outcomes so far this year. 

In the first seven months of 2018, Jetstar Pacific posted profits for the first time in years. 

Vietnam Airlines enjoyed quite good financial results in the first half of 2018. In the second quarter alone, the carrier’s after-tax profit hit 309 billion VND (13.23 million USD), a 4-fold increase against the same period last year. The firm’s total after-tax profit in the first half of the year soared 83 percent to over 1.5 trillion VND (64.23 million USD).

Vietjet Air posted the highest profit of the local aviation industry in the first six months which was estimated at more than 2 trillion VND (85.64 million USD).

Vietnamplus

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