Domestic aviation enterprises struggled to bear the battle because fuel prices increased continuously, “eroding” profits.
Responding to VTC News, a representative of Vietnam Airlines said that the airline is facing many difficulties due to the sharp increase in fuel prices. On March 10, the world spot oil price reached $161/barrel, while the average price in 2021 was only about $73/barrel.
With this increase more than doubled, the production and business results of airlines were strongly affected. The more airlines fly, the higher the costs and the more losses. According to calculations, with just 1 USD/barrel/year increase or decrease, the cost increase or decrease will be equivalent to 87 billion VND/year. Currently, the cost of flight fuel of Vietnam Airlines in the first quarter of 2022 accounts for more than 30% of operating costs and is expected to increase in shock due to the increasing trend of world gasoline prices.
In the face of the hot increase in fuel prices, Vietnam Airlines once proposed to the Ministry of Transport to consider adjusting the ceiling price of domestic airfares and allowing airlines to collect fuel surcharges for domestic flights, following previous international airline practices when fuel prices fluctuated.
Vietnam Airlines also proposed the Ministry of Finance consider and report to the Prime Minister for approval the plan to apply the policy of 100% environmental tax exemption for jet fuel in 2022 (currently applying a 50% reduction) to reduce financial burden on airlines.
Similarly, Mr. Vu Duc Bien, General Director of Vietravel Airlines, assessed that fluctuating fuel costs are a huge challenge for airlines, even some airlines may have to stop flying if fuel prices are expensive. Will it continue to rise?
Vietravel Airlines has sent a document to the Prime Minister and related agencies, proposing solutions to remove difficulties for aviation enterprises. According to Vietravel Airlines, the aviation industry is currently facing many difficulties as fuel costs increase, inflation and consumers tend to tighten spending due to the slow economic recovery after the pandemic. Vietravel Airlines proposes to speed up the credit support package for airline businesses. At the same time, exempting corporate income tax in 2022, reducing VAT to 5% to stimulate the market.
Vietravel Airlines also suggested that the Ministry of Finance, the Ministry of Transport and relevant agencies consider reducing the import tax on aviation fuel to 0% (compared to the current 7%) and reduce the environmental tax to 1,000 VND/liter. The application period is from now until the end of 2022.
In addition, the airline also wishes to be supported to reduce 50% of service prices in the aviation industry; adding a provision that allows airlines to actively apply fuel surcharges to domestic routes if the price of Jet A1 rises from $100/barrel or more.
A representative of Bamboo Airways also said that fuel costs account for a large proportion of air transport costs, so the increase in fuel prices greatly affects the cost and production and business costs of all domestic airlines. This is a disadvantage when on the way to recover after the epidemic.
According to the Civil Aviation Administration, by the end of May 2022, Vietnam Airlines, Vietjet, Vietravel Airlines… have reopened many important international routes, while the domestic flight network has recovered 100%. Although it is expected that airlines will lead the recovery wave after the epidemic, airlines are still burdened with continuously increasing fuel costs, so the growth is not as expected.
@ Vietnamnet
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Source: Vietnam Insider