The Civil Aviation Administration of Vietnam (CAAV) has suggested to the Ministry of Transport the reduction of economy-class airfares on domestic routes.

Illustrative image.

Following CAAV's petition, which was based on the substantial decrease in the price of commercial aviation fuel Jet A1, airfares will be slashed from the current 5,000 VND (0.23 USD) to 4,250 VND (0.20 USD) per km for every passenger.

According to the Ministry of Finance's Decision 2967/QD-BTC, the maximum price for economy-class tickets on domestic air routes was calculated based on the price of Jet A1, which was estimated to be sold at 130 USD per barrel with zero percent import tax.

However, the price of Jet A1 (including 7 percent import tax) was only 90.63 USD per barrel as of December 2014. Therefore, the petrol costs dropped by 43.4 percent compared with the maximum price considered in the ministry's decision.

The CAAV said that fuel costs account for approximately 39.5 percent of the airline's overall costs. Hence, the airline's total costs will drop by 17 percent following the petrol price decline.

VNA/VNN