The Ministry of Transport has recently responded to the recommendations from the Vietnam Aviation Business Association (VABA) regarding the proposal to abolish the price ceiling regulation for air transportation services. According to the ministry, they suggest maintaining the draft Law on Prices.
Photo: Vietnam Airlines
“For domestic passenger transportation services, the Ministry of Transport determines the maximum price, while airlines decide on specific prices.”
The Ministry of Transport believes that air transportation services have a significant impact on people’s lives and business activities.
Not regulating the price ceiling means that the state relinquishes its regulatory tool and allows businesses to have full control over determining the prices of their services. Removing the price ceiling could potentially lead airlines to set higher ticket prices, especially on routes with limited competition or during peak seasons, which would affect consumer rights.
Furthermore, domestic passenger transportation services are still considered a market with limited competition and are currently subject to pricing regulations stipulated in Article 21, Section D of the draft Law on Prices.
Currently, there are only five airlines participating in the market, and some companies hold a market share of over 30% – dominating the market.
In the long term, the Ministry of Transport believes that when the supply capacity of the aviation sector meets social demands and the aviation market involves the participation of various Vietnamese airlines, promoting genuine competition through ticket prices and service quality, allowing passengers to choose according to their needs and capabilities, the proposal to remove the price framework for domestic passenger transportation services would be appropriate.
Accordingly, the government will manage domestic air service prices based on a mechanism regulated by the self-regulating market and control the selling prices of airlines according to the provisions of the Competition Law.
However, the gradual removal of the price regulation for domestic passenger transportation services should have a roadmap and be implemented in the immediate phase to respect and ensure the pricing rights of businesses. The draft Law on Prices has been timely completed by transitioning from the price framework to the maximum price regulation, aiming to create a healthy competitive mechanism to reduce service prices and protect consumer interests.
Earlier, on June 19th, the National Assembly passed the Price Law, with 92.91% of participating delegates voting in favor. Among the provisions, the National Assembly approved the price ceiling for domestic air passenger transportation services.