The Civil Aviation Administration of Vietnam (CAAV) has ordered local airlines to reduce ticket prices following declining fuel prices.

The Civil Aviation Administration of Vietnam has ordered local airlines to reduce ticket prices

The CAAV has sent a document to the Ministry of Transport, asking them to work with the Ministry of Finance on reducing air ticket prices.

According to the CAAV, because the price of A1 jet fuel has seen steep declines recently, airlines should pass on some of the savings to their customers.

The CAAV has recommended a maximum price for economy class passengers on domestic flights of VND4,250 per km instead of the current VND5,000.

According to a decision issued by the CAAV on December 6, 2011, the highest ticket prices were applied when A1 jet fuel was USD130 per barrel and the import tariff was zero.

Today, however, the price is around at USD84.70 per barrel with an import tariff of 7%, setting the actual price at around USD90.63 per barrel, 43% less than the USD130 the price cap was designed for.

Fuel costs often account for just under 40% of airlines’ total costs, which translates to a 17% reduction in costs for airlines.