Should the plane ticket price be applied at this time?

At the recent meeting with the Civil Aviation Authority of Vietnam on solutions to solving problems for aviation in the Covid-19 pandemic, the representative of Vietnam Airlines proposed to raise the ceiling price and apply the ticket floor price.

Applying the floor price for fear of unfair competition

According to the recommendation of Vietnam Airlines, the ceiling price will increase from 50,000 to 250,000 VND / person. The floor price is proposed under 2 options: The average variable cost of 1 seat per group of distances of low-cost airlines or equal to 35% of the ceiling price for each distance.

Should the plane ticket price be applied at this time?

Passengers check-in at counters of Vietnam Airlines. Photo: Vu Tuan

In which, with a distance of less than 500 km, the group of socio-economic development areas, proposed to keep the ceiling price, but apply the floor price of 414,000 VND or 560,000 VND (option 35% of the ceiling price). As for other groups of areas, the floor price is 414,000 VND or 595,000 VND.

The current ceiling price for the flight group of 500 – 850 km, the ceiling price of 2.2 million VND / ticket is proposed to increase to 2.25 million VND / ticket; 850 – 1,000 km from 2.79 million VND / ticket to 2.89 million VND / ticket; distance 1,000 – 1,280 km from 3.2 million VND / ticket to 3.4 million VND / ticket … With the above distances, the proposed floor price is 570,000 – 787,500 VND / ticket, 755,000 VND / ticket, respectively. 1 million VND / ticket; 804,000 – 1,190,000 VND / ticket.

While the Covid-19 pandemic is complicated and seriously affecting airlines, Vietnam Airlines said its proposal to adjust the floor price is on the basis of reasonable airport operating fees, ensuring the the company does not devalue, the competition is not healthy. The ceiling price adjustment is to match the market situation and input costs.

With the application of the floor price, the airline market will no longer have 0 VND tickets, super cheap tickets. However, this is not a new proposal. In 2017, Vietnam Airlines has proposed to apply a floor price from VND 600,000 to VND 1.2 million / ticket depending on the flight sector, but then the Ministry of Transport decided not to apply a floor price.

Mr. Tran Van Long, General Director of Vietnam Tourism Company, commented that the proposal to apply airfares can also be a solution to create healthy competition in the market, in the context of airlines competing fiercely at prices. In fact, as a rule, each flight with a promotional ticket or a 0 VND ticket with a certain quantity will have to register with the market regulator, not even the flight is a cheap ticket, lower than the price. “Some airlines have been mainly competing with cheap prices, racing to lower prices to attract customers and take market share. Part of the consequence is that tour operators who book tickets in advance, early tickets to build tours to sell to customers must buy tickets at higher prices than those who go on their own, buying air tickets afterwards. Even cheaper later tickets booked months earlier are not reasonable” – Mr. Tran Van Long analyzed. Therefore, applying air ticket floor prices for airlines to compete with service quality, incentives for passengers with reward points, services …, not just by fares.

Disadvantage for consumers

From an expert perspective, Associate Professor, Dr. Ngo Tri Long, former Director of the Institute of Price Market Research (Ministry of Finance), said that the price law regulates the markets that businesses (enterprises) still keep. As the dominant position in the current aviation market with Vietnam Airlines and VietJet Air accounting for more than 50% of the market share, that means there is no real competition, so the state still has to set a ceiling price and not set a floor price. “The reason is that if the ceiling price is exceeded, it will be detrimental to consumers, and how businesses want to lower prices depends on businesses, only beneficial for consumers. The proposal of a floor price is unreasonable, not suitable for competition according to the market “- Mr. Long emphasized.

Mr. Tu Quy Thanh, General Director of the Federal Travel Company, also said that the price of air tickets is non-market. Applying the floor price will cause the cost of air tickets to increase, thereby pushing up the tour cost … “In fact, each airline has a certain segment of customers, a certain market share such as the popular line of customers, mid-end or high. The airlines can compete by the quality of products, services … instead of proposing to apply the ticket floor price to create an advantage in favor of certain airlines, affecting the interests and disadvantages for customers “- said Mr. Tu Quy Thanh.

Regarding the fear of enterprises devaluation, Associate Professor, Dr. Ngo Tri Long, said that enterprises only consider the dumping in case of selling at lower cost and suffering losses, but accepting losses to eliminate competitors, not just selling at lower prices. Price break. “Enterprises sell at lower prices but do not lose money, they do not have to dumping” – he asserted. Therefore, in the current period, when airlines have difficulties due to Covid-19, the application of the floor price is not conducive to consumers and does not encourage competition, because a good business enterprise can Lowering prices and still making a profit should not be limited because it is beneficial to consumers.

As for the proposal to raise the ceiling price, Associate Professor-Dr. Ngo Tri Long expressed her support. Because according to him, the ceiling price is the price regulated by the State, which changes according to input factors. If input changes, the ceiling price must also change. “Last time, airlines had to cancel a lot of flights but still had to nurture a huge apparatus, the costs were not only not reduced but also increased due to spending on disease prevention, the gap regulation … For Therefore, the adjustment of the ceiling price to match the input, the authorities need to consider. The Ministry of Transport, the Ministry of Finance (the Price Management Department) need to sit down to consider. Increasing adjustment is reasonable but needs to be very cautious “- Associate Professor, Dr. Ngo Tri Long.

Quite sensitive

Talking to a reporter from Nguoi Lao Dong Newspaper about the proposed floor price of Vietnam Airlines in the current period, an official of the Civil Aviation Authority of Vietnam considered this to be quite a sensitive issue. The Department always listens to businesses, but currently has no intention of the ticket floor price.

Duong Ngoc – Thai Phuong

Source: nld.com.vn – Translated by fintel.vn

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