CAAV asks to increase airfare due to oil prices

To deal with fuel prices, the Civil Aviation Authority of Vietnam (CAAV) just proposed raising air service prices on domestic routes to the Ministry of Transport (MoT).
The Civil Aviation Authority of Vietnam (CAAV) proposes raising air service prices on domestic routes to deal with increased oil prices. — Photo
In a recent proposal sent to MoT, CAAV asked for a reduction in environmental protection taxes and import taxes on jet fuels, and an increase in service fees on domestic routes.

CAAV proposed to raise passenger transportation fees on domestic routes by 3.75 per cent to the rate set in 2014.

According to the International Air Transport Association (IATA), on July 1, 2022, the price of Jet A1 fuel in Asia reached $153.59 per barrel while the average price of Jet A1 in 2022 was estimated at US$143.4 per barrel. 

IATA consider this a problem that causes the most "headaches" for air transport businesses.

In Vietnam, CAAV calculated: “If fuel costs account for 39.5 percent of total costs and other costs stay the same, local airlines are seeing the fuel costs for July 2022 rising by up to nearly 93 per cent compared to that of December 2014, and by nearly 115 percent compared to that of September 2015. And the rising fuel costs are driving total costs for July 2022 up by 39 percent against December 2014 and by over 46 percent against September 2015.”

A representative of Vietjet Air told local media that the airline builds its business plan on the basis of gasoline prices at $80 per barrel in 2022.

With the current gasoline price, Vietjet Air will incur an additional cost of VND6.5 trillion (US$282 million) to VND7.5 trillion.

According to economic experts, if the high fuel costs are not removed, it will affect the exploitation output of the whole industry and airlines will have difficulty recovering and expanding their flight network, even having to close some routes due to unbalanced costs.

CAAV also proposed to apply the fee for assessment and issuance of certificates, permits and certificates in aviation activities at only 80 percent of the prescribed rate to help the industry.

The agency also proposed a similar reduction to the security transaction registration fee for aircraft.

In the latest move from the Ministry of Transport on July 6 In 2022, Minister Nguyen Van The signed Official Letter No 6779/BGTVT-TC to the Ministry of Finance proposing to reduce fees and charges in the field of transport, in which, in the aviation industry, the MoT proposes to reduce the collection of some fees issued in Circular No 193/2016/TT-BTC dated November 8, 2016 by the Ministry of Finance regulating collection rates, payment, management and use of fees and charges in aviation industry.

Specifically, a 20 percent reduction of fees for assessment and issuance of certificates, permits and certificates in civil aviation activities, issuing permits to enter and exit restricted areas at airports and airfields, and a 20 percent discount on security transaction registration fee for aircraft.

The implementation period is until the end of 2022.

On July 6, the National Assembly Standing Committee adopted a resolution on environmental protection tax for petrol, diesel and grease. Accordingly, the environmental protection tax on jet fuel will be lowered to VND1,000 per litre from the current VND1,500.

The reduction will be applied from July 11 until the end of this year.

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