The Vietnam epidemic has not yet reached an inflection point, but the number of new cases in a single day has begun to decline, and the number of deaths in a single day is also gradually decreasing. As the Prime Minister of Vietnam puts forward the epidemic prevention idea of coexisting with the epidemic, the unblocking of various places is also coming.
After waiting for more than a year, Vietnam Airlines market has finally begun to prepare to resume domestic air services. In order to seize the air transport market in the new era after the epidemic, major airlines in Vietnam have begun to use their best efforts.
According to news on September 24, the Civil Aviation Administration of Vietnam proposed a proposal to the Ministry of Transport of Vietnam to implement a minimum price strategy for flight fares. However, the proposal has been met with mixed praise and criticism from major airlines.
▲ Hanoi Noi Bai Airport
The so-called minimum price strategy refers to the need to set a minimum price for domestic flight fares in Vietnam. On this basis, major airlines can increase their asking prices according to the length of domestic routes and different flight classes.
However, regarding the issue of reserve prices, major airlines have launched a fierce debate and even split into two completely different views. In particular, most Vietnamese people are strongly opposed to the implementation of the low-price strategy. The reason is simple. The low-price flights launched by low-cost airlines are very suitable for people who are struggling during the epidemic. However, the strategy of "breaking through the lowest price" has harmed the interests of other airlines.
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html On September 24, Dinh Viet Seng, Director of the Civil Aviation Administration of Vietnam, submitted a report on adopting a minimum air ticket price strategy to the Ministry of Transport of Vietnam.
Because of the minimum price strategy, all airlines are required to set a minimum price when providing domestic flight services, and cannot lower the price indefinitely to engage in price wars. However, when reporting to the Ministry of Transport, the Civil Aviation Administration of Vietnam also admitted that the lowest price strategy has shortcomings and limitations.
"One of the limitations of this policy is that the services provided by each airline and their costs are not at the same level, so it is difficult to determine the lowest price applicable to all airlines," Director Ding said.
Indeed, with the proposal of the lowest price strategy and media reports, the lowest price strategy has been strongly opposed by many experts and consumers.
"Of course, this is only a temporary solution at present, which will only be applied in a short period of time, and the implementation of the plan can only be finalized on the basis of ensuring the harmony of interests among consumers, airlines and the country," the Civil Aviation Administration of Vietnam added. explain.
According to the proposal submitted to the Ministry of Transport, the Civil Aviation Administration of Vietnam proposed to adopt a decision where the lowest price is equal to 20% of the highest price.
For example, for flights within 500 kilometers, the minimum fare proposed for flights serving social and economic development is 320,000 VND/ticket (91 yuan), and the highest is 1.6 million VND/ticket (457 yuan); For other flights, the minimum price is 340,000 VND/ticket (97 yuan), and the maximum price is 1.7 million VND/ticket (486 yuan).
html For routes between 1,500 and 850 kilometers, the minimum price is VND 440,000 (126 yuan) and the maximum price is 2.2 million VND (629 yuan); for routes from 850 kilometers to 1,000 kilometers, the corresponding minimum and maximum prices are VND 560,000 (160 yuan) respectively. yuan) and VND2.79 million (797 yuan).
Finally, for routes over 1,280 kilometers, the lowest and highest prices are VND 750,000 (214 yuan) and 3.75 million VND (1,071 yuan) respectively.
Talking about the basis for proposing the lowest fare, the person in charge of the Civil Aviation Administration of Vietnam said that this was due to the urgency of promulgating the policy and there was no time to do too much research. The lowest price was ultimately determined based on the comparative method.
When comparing the ratio of the lowest price to the highest price with countries that have or are implementing minimum price regulations for domestic air transport service prices, the Civil Aviation Administration of Vietnam decided to propose the lowest price to the highest price ratio, with the former only being the latter. 20%.
The person in charge said that after research, it was found that the lowest price of domestic flights in Indonesia is 35% of the highest price, that in India is 33-35%, and that in China is 44%.
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However, the Civil Aviation Administration of Vietnam also stated that this comparison of Vietnam’s fares with other countries is only relative, because the Civil Aviation Administration of Vietnam does not have specific data on other countries’ methods of establishing the lowest and highest price ranges.
At the same time, the Civil Aviation Administration of Vietnam also compared the proposed minimum price with the average cost of each seat provided by the Hanoi - Ho Chi Minh City route when it was not affected by the epidemic in 2019. Because this is the most common route in Vietnam, all airlines are involved in its development.
At that time, the price of passenger services on this route was implemented by the airline according to a flexible fare mechanism. In addition, the Civil Aviation Administration of Vietnam pointed out that various airlines also provide consumers with many prices to choose based on different purchase conditions and time.
According to Din Viet Seng, the average cost of major airlines on this route is more than VND1.5 million, which is equivalent to about 47% of the current highest price. “Therefore, the minimum level proposed by the Civil Aviation Administration of Vietnam is approximately 43% of the average airline cost, which is appropriate,” Director Dinh said.
It is worth noting that according to the minimum price proposed by the Civil Aviation Administration of Vietnam, passengers must pay the minimum price for a one-way ticket from Hanoi to Ho Chi Minh City after adding VAT and other charges (price of passenger services and ensuring passenger safety and luggage, etc.) The cost is about 824,000 VND (235 yuan), which is basically the same as the price of air-conditioned soft seats for railway transportation, and is equivalent to the fare of road transportation services.
On the other hand, different types of transportation have different fare construction characteristics. For road transport, the price is basically the same for all seats in the same car.
For railway transportation, even on the same train, the fare can be set at 4-5 different prices according to different service quality (extra seats, hard seats, air-conditioned soft seats, air-conditioned sleepers).
For airlines, the price of passenger services is implemented by the airline according to the flexible fare mechanism. On the same flight, with the same service quality, there are still different fares from low to high. This depends on the purchase of different tickets. Occurs differently with time.
There are so many comparisons, what do they mean? That is, the construction of airline service price ranges needs to balance the minimum and maximum levels so that airlines can deploy flexible fare policies instead of imposing minimum prices, which is not conducive to airlines developing the maximum value of flights.
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Therefore, as soon as the Vietnam Civil Aviation Administration’s minimum price policy came out, various airlines in Vietnam started to "quarrel", and there were two obvious views.
Vietnam Airlines, Jetstar Pacific and Bamboo Airways are in the same group and believe that the minimum price strategy is "active and effective". The Civil Aviation Administration of Vietnam stated that these three airlines believe that the minimum price policy for domestic route passenger services has had a positive impact on their business.
If the lowest price strategy proposed by the Civil Aviation Administration of Vietnam is adopted, Vietnam Airlines’ revenue will increase by 20 billion VND (5.71 million yuan) in 2019, 390 billion VND (110 million yuan) in 2020, and 2,700 VND in the first half of 2021. billion VND (77.14 million yuan).
Jetstar Pacific’s revenue in the first half of 2021 increased by VND338 billion (96.57 million yuan).
Although there is no specific evaluation data, Bamboo Airways believes that a reasonable lowest price strategy will be a good adjustment tool for the company's sales and have a positive impact on route revenue on the basis of ensuring the health and safety of the airline.
On the contrary, Vietjet Air and Vietnam Airlines are not optimistic about the lowest price strategy.
One of these two is a well-known low-cost airline, and the other is a new airline that is also seizing the market with low prices. Obviously, after formulating the lowest price strategy, they cannot freely lower ticket prices and will lose their advantage in competition with other airlines.
Therefore, these two airlines believe that the policy of formulating the lowest price for domestic route passenger services has many shortcomings and limitations, which will have a negative impact on the operating activities of the airlines.
Specifically, Vietnam Airlines believes that the implementation of the lowest price policy will make passengers choose airlines with higher services, so low-cost airlines will be at a disadvantage, especially new airlines that have entered the aviation market, and their flights The flying fleet has the lowest development frequency in the market and is at a disadvantage in terms of products, with both market coverage and brand value suffering.
"In the context of economic recovery in the late stages of the COVID-19 epidemic, due to severe revenue deficits during the lockdown, adopting the lowest price strategy will directly harm the rights and interests of consumers and may significantly reduce people's demand for travel," the airline said.
At the same time, Vietjet Airlines believes that the minimum price policy will have a strong negative impact on all social strata and many socioeconomic fields. Low-cost airlines will lose their competitive advantages, which may make Vietnam's aviation industry lack momentum.
The Civil Aviation Administration of Vietnam reported to the Ministry of Transport of Vietnam that the proposed minimum price strategy not only considers ensuring the interests of consumers, but also maintains the balance of interests between airlines and national taxation.
The content of the current proposal is that it plans to adopt a minimum price policy on all domestic routes from November 1 this year to October 31 next year. However, due to discussions and criticisms from different airlines, and the possibility of harming consumer rights, The Ministry of Transport of Vietnam did not approve the implementation and requested the Civil Aviation Administration to continue to discuss and study a more reasonable pricing plan.
