Airfares remain high in Vietnam due to lack of competition

Airplane ticket prices in Thailand are low due to the presence of multiple airlines, whereas in Vietnam only two major airlines operate, meaning a lack of competitive dynamics.

According to the Civil Aviation Authority of Vietnam, the average economy class ticket prices on some domestic routes have increased compared to the same period in 2023. The airfares are influenced by five main factors – fuel prices, exchange rate differences, the recall of Pratt&Whitney engines, increased aircraft leasing costs, and the supply-demand situation. The consequence is a supply-demand imbalance, causing ticket prices to rise.

To understand why current airplane ticket prices are high, we must grasp the essence of the problem. The increase in ticket prices is not just about taxes and fees, but mainly because the two major airlines currently dominating the domestic market, Vietnam Airlines and Vietjet, lack sufficient aircraft to meet the travel needs of the people.

But why does this affect ticket prices? It is because during peak season (holidays, summer vacations…), due to a shortage of aircraft, airlines are forced to operate flights without passengers, to bring the aircraft back to major airports like Tan Son Nhat in HCMC or Noi Bai in Hanoi to serve passengers. The airlines incur losses for such empty flights. This is a significant amount of money, thus forcing them to increase ticket prices on the other way to cover losses.

The important question is how to resolve this issue? Clearly, we cannot simply call for or pressure the airlines to reduce ticket prices, as they are doing business and cannot afford to operate at a loss. We need to increase the number of aircraft fleets and fix the shortage of airplanes. To achieve this, there is no better way than to have more airlines join the aviation market. Airlines will not have to operate empty aircraft to pick up passengers.

Take Thailand as an example. Their air ticket prices are low even during the peak season because they have many airlines operating, resulting in high competition, and undoubtedly, the customers would benefit. Vietnam has only had a few new airlines and there are not enough of them on the market to compete against each other.

I think this lucrative market will sooner or later attract investment. Our infrastructure is increasingly improving, with the Long Thanh airport about to be completed to replace Tan Son Nhat as Vietnam’s biggest.

I believe that in the future, more new airlines will be established, increasing competition, supplementing supply, and making airplane ticket prices as affordable as the situation in Thailand.

It will take time for mechanisms and policies to be established to encourage and facilitate the participation of new airlines. But I believe Vietnamese people will soon benefit from a vibrant, competitive aviation market.

By Tuan Nguyen – VnExpress.net – May 8, 2024