The Civil Aviation Authority of Vietnam has recommended a 20 percent increase in ceiling fares on domestic routes, citing the depreciation of the dong and fuel price hikes.
Lao Dong (Labour) newspaper said Vietnam Airlines was the first carrier to ask for a hike after the State Bank of Vietnam's decision to allow the greenback to appreciate by 9 percent last month.
Pham Ngoc Minh, general director of Vietnam Airlines, said airlines had to pay 70 percent of their costs, including for fuel, aircraft leasing, and pilots' salaries, in foreign currency, and these have now risen sharply.
As a result of not being allowed to increase fares or collect fares for domestic flights in foreign currencies, carriers have been forced to pick up the extra tab.
Minh said Vietnam Airlines incurred a loss of 30 million USD on domestic flights last year.
Ta Huu Thanh, deputy general director of Jestar Pacific Airlines, said the carrier had fixed its fares when the exchange rate stood at 18,465 VND per dollar. Now the exchange rate is 20,850 VND.
For Jestar Pacific, fuel expenses account for 45 percent of revenue from airfares.
Other expenses had also risen due to high inflation, he said.
The carrier's fares now stand at 35 USD per flying hour per passenger compared with some 60 USD in Thailand and 75 USD in Malaysia.
It wanted a fare hike of 25 percent to avoid losses, Thanh added.
Doan Quoc Viet, chairman of Mekong Air, said fuel costs accounted for 50 – 60 percent of revenue from airfares while the exchange rate adjustment had increased expenses by 13 – 14 percent. Mekong Air had sought a fare increase of 20 to 50 percent so that it could earn 2 to 3 percent profits to remain operational, he added.
CAAV deputy general director Luu Thanh Binh said the carriers' demands were "reasonable" since current fares were likely to cause losses.
But in the current situation, with the country already grappling with inflation, a 20 percent increase in air fares would be more reasonable, he added.
Tran Ngoc Thanh, head of the Ministry of Transport's Transportation Department, said the hike must be approved by Prime Minister Nguyen Tan Dung.