Travel agents say proposed airfare hike bad news for industry

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Travel agents worry that a proposed airfare hike could see local tourists abandon their plans to travel domestically in favor of going abroad.

A group of all local airlines have asked the government to raise the domestic airfare price cap this November, saying operation costs have increased due to higher fuel prices and exchange rates, according to the Civil Aviation Administration of Vietnam. The ceiling is now set at VND2.7 million for a one-way ticket.

If the proposal is approved, the price ceiling for domestic airfares at Vietnam Airlines will increase by 50 percent. Specifically, a single Hanoi-Ho Chi Minh City ticket will cost up to VND3.34 million (US$160), which does not include value added taxes and other fees, while Hanoi-Phu Quoc Island airfare may surge past VND4 million. 

With the proposed hike, airfares are estimated to rise by 73 percent since early this year. Vietnam allowed domestic carriers to increase their ceiling airfares by 23 percent in April.

Travel agents say that the hike will make domestic tours less competitive than overseas trips.

Nguyen Cong Hoan, deputy director of travel agent Hanoi Redtour, said airfares often account for 50 percent of tour costs. "If airfares rise by 50 percent, tour prices will go up by some 25 percent."

While tour prices in Vietnam would increase with the hike, outbound rates may even drop because several international airlines have recently cut their airfares, and service providers abroad have launched promotional campaigns to lure customers.

Nguyen Minh Man of Vietravel said some domestic tours will be more expensive than tours to Southeast Asian countries such as Singapore, Malaysia and Thailand. "Domestic tours will see fewer customers, because Vietnamese people will prefer outbound tours."

Now, a four-day tour from Vietnam to Singapore costs $500, and to Thailand over $300, while that from Hanoi to HCMC costs some $450.

Man said the airfare hike would deal a blow to local travel agents, who already face difficulties due to high inflation, which has caused local travel demand to fall. "If the airfare hike proposal is approved, travel agents will see more cancellations of booked tours," he said.

Another travel agent said many foreign customers booked tours two to three months in advance, meaning that travel companies would have to increase already agreed upon tour prices or face losses if the airfare hike proposal is approved for November. "They have to suffer losses to keep their prestige," said the agent who requested anonymity.

Vietnam had 4.3 million foreign visitors in the first nine months of this year, up 15.5 percent over the same period last year, according to the Vietnam National Administration of Tourism.

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