At a conference reviewing the aviation industry’s activities over the past year, which drew the participation of the country’s large carriers, Minister of Transport Dinh La Thang recommended lower fares for passengers.
Jet A1, the most common jet fuel now averages just $47 a barrel, down more than 40 percent from a year previous. However, there have not been any changes in airfares.
With fuel accounting for 40% of airline operating costs, airline operators should in theory be able to offer discounts. However, some carriers argued that they faced larger expenses from aircraft rental and purchases and foreign employee salaries due to a stronger dollar. Fuel import tariffs and environmental fees have also been raised by 7-10%.
But despite the claims of higher operating costs, airlines raked in a 44% increase in revenue and profit targets in 2015. In documents sent to Vietnam Airlines, the transport minister has called for lower airfares to match the sharp decline in fuel costs.
Based on their current prices, fuel costs would only account for 26% of total operating costs and the Civil Aviation Authority has required air carriers to develop plans to reduce fares and submit their proposals to the authority no later than January 10th.
