Jet fuel prices surge; Civil Aviation Authority of Vietnam proposes fuel surcharge instead of adjusting airfare caps

Airlines are reportedly facing losses of thousands of billions of VND per month, prompting the Civil Aviation Authority of Vietnam (CAAV) to propose the introduction of a fuel surcharge, while the adjustment of the domestic airfare price cap may also be considered.

On March 9, the CAAV submitted a report to the Ministry of Construction assessing the impact of the Middle East conflict and outlining response measures related to the sharp rise in aviation fuel prices.

Airlines are facing significantly higher operating costs—amounting to thousands of billions of VND per month—due to the sharp surge in aviation fuel prices.

The Middle East conflict is directly affecting air transport operations between Vietnam and the region. From February 28 to March 10, a total of 98 flights (80 passenger flights and 18 cargo flights) operating between Vietnam and the Middle East by Qatar Airways, Emirates, and Etihad Airways were impacted, affecting an estimated 20,000 passengers. With the conflict becoming increasingly complex and its end uncertain, the aviation industry expects continued challenges in the coming months.

Rising fuel prices, weakening travel and trade demand, and the potential risk of supply chain disruptions could significantly affect airline operations, particularly during the peak travel period of the April 30 – May 1 holidays and the summer 2026 season. According to the International Air Transport Association (IATA), increases in Jet A-1 fuel prices could raise airline operating costs by 50–60%, and if prices exceed USD 200 per barrel, total operating costs could rise by over 70%. Currently, fuel accounts for approximately 35–40% of total airline operating costs, further intensifying financial pressure on airlines.

Reports from Vietnam Airlines, VietJet Air, and Sun PhuQuoc Airways indicate that with Jet A-1 fuel prices hovering around USD 200–230 per barrel in recent days, Vietnam Airlines’ operating costs could increase by 50–60% per month compared with pre-conflict levels, while Sun PhuQuoc Airways’ costs may rise by about 30%. For VietJet Air, given its current operating scale, fuel price increases could add around VND 2 trillion in additional costs per month.

The surge in fuel prices has also made many routes economically unviable, with some flights potentially operating at a loss as revenues fail to offset additional fuel expenses. As a result, Vietnamese airlines are reviewing their flight operations and adjusting schedules from April 2026 onward to reduce fuel consumption and avoid flight cancellations caused by potential disruptions in aviation fuel supply.

Meanwhile, airports and ground service providers are also under pressure as the risk of reduced flight frequency increases, while the sharp rise in diesel prices is driving up the cost of operating vehicles and equipment at airports.

Proposal to introduce fuel surcharges; domestic airfare caps may be adjusted

The Civil Aviation Authority of Vietnam (CAAV) has proposed that the Ministry of Construction report to the Government and the National Assembly on a series of measures aimed at reducing cost pressures and ensuring stable operations for domestic airlines.

Accordingly, the CAAV recommends that the Government promptly issue a decree revising the Most Favored Nation (MFN) import tariffs on certain petroleum products and aviation fuel inputs. At the same time, the authority proposes that the Standing Committee of the National Assembly consider a 100% exemption of the environmental protection tax on aviation fuel until the end of May 2026, as well as adding aviation fuel to the list of goods eligible for VAT reduction from 10% to a more appropriate level.

The CAAV also suggests allowing fuel surcharges on domestic air tickets, with a flexible adjustment mechanism linked to actual fuel price fluctuations. If necessary, the Government may consider adjusting the domestic airfare price cap to ensure airlines can maintain operational sustainability.

To stabilize fuel supply, the authority proposes establishing high-level working mechanisms with countries currently restricting fuel exports, such as Thailand and China, in order to facilitate Vietnamese companies in fulfilling existing Jet A-1 fuel purchase contracts. In addition, the CAAV recommends reducing certain aviation-related fees by 50%, including landing, take-off, and air navigation service fees, similar to the support policies implemented during the COVID-19 period.

Furthermore, the authority proposes several coordinated support measures across ministries and agencies. The Ministry of Finance is encouraged to continue reviewing tax and fee support policies, while the State Bank of Vietnam is asked to consider increasing credit limits and providing L/C guarantees for aviation fuel suppliers and airlines.

The Ministry of Industry and Trade is recommended to expand fuel supply sources and instruct domestic refineries such as Dung Quat and Nghi Son to maximize Jet A-1 production capacity. Meanwhile, the Ministry of Foreign Affairs is expected to support engagement with international partners to facilitate access to fuel supplies and the maintenance of historical flight slots.

Theo 24hmoney

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