Vietnam Civil Aviation Authority Proposes Fuel Surcharge for Domestic Airfares to Offset Jet Fuel Costs

Overview

The Vietnam Civil Aviation Authority (CAAV) has renewed its proposal to introduce a fuel surcharge mechanism for domestic airfares, aiming to help airlines offset the sharp rise in jet fuel costs. Jet A1 prices in Asia have exceeded $200 per barrel since late February 2026, more than doubling from pre-Middle East conflict levels. The surcharge would apply to basic economy tickets on domestic routes, with rates varying by flight distance, and is expected to be in place for about three months. This regulatory change directly impacts listed carriers Vietnam Airlines (HVN) and Vietjet Air (VJC).

Key Facts

• Jet A1 fuel prices in Asia have exceeded $200 per barrel since late February 2026, more than double pre-conflict levels.
• Fuel costs account for approximately 35-40% of total flight operating costs.
• The proposed surcharge would be triggered when Jet A1 prices reach $100 per barrel or higher, with incremental increases per $10/barrel.
• The surcharge is calculated based on a base price of $90 per barrel, with the additional cost split 50-50 between airlines and passengers.
• For a 2-hour flight like Hanoi-Ho Chi Minh City, the proposed surcharge is about VND 311,000 per leg.
• The surcharge applies only to basic economy class tickets on domestic routes.
• The mechanism is intended as a temporary measure for approximately three months.

What Happened

The CAAV has submitted a proposal to the Ministry of Construction requesting approval for a fuel surcharge on domestic airfares. According to the CAAV, the current price cap mechanism does not allow for flexible adjustments to reflect volatile fuel costs. The surcharge is designed as a short-term solution to partially compensate airlines for the surge in jet fuel prices, which have more than doubled since the escalation of the Middle East conflict.

The proposed surcharge would be applied when Jet A1 prices exceed $100 per barrel, with rates increasing in $10 increments. The base price of $90 per barrel represents the average over the past two years, which the CAAV considers a level airlines can absorb. The additional cost above this base is shared equally between the airline and the passenger. The CAAV notes that the proposed surcharge levels are significantly lower than those applied in Japan and South Korea for similar flight durations.

Market Context

Shares of Vietnam Airlines (HVN) closed at VND 23 on April 15, 2026, up 2.24% on volume of 1.1 million shares on HOSE. Vietjet Air (VJC) closed at VND 176, up 5.82% on volume of 2.5 million shares on HOSE. The aviation sector has been under pressure from rising fuel costs, and the proposed surcharge could provide some relief to margins. However, the temporary nature and 50-50 cost sharing mean the impact on airline profitability may be limited. The broader market context includes ongoing geopolitical tensions affecting global fuel prices and the Vietnamese government’s cautious approach to regulating airfares.

Strategic Significance

For long-term investors, the fuel surcharge proposal signals a potential shift in Vietnam’s aviation regulatory framework toward more flexible pricing mechanisms. If approved, it could allow airlines to better manage fuel cost volatility without relying on permanent price cap adjustments. The 50-50 cost-sharing structure implies that airlines will still bear a significant portion of the fuel cost increase, but the surcharge provides a transparent and adjustable tool. This development is particularly relevant for HVN and VJC, as fuel costs are their largest operating expense. The outcome of this proposal may influence future regulatory approaches to cost pass-through in the sector.

What to Watch

• Government approval: Whether the Ministry of Construction and the Prime Minister approve the surcharge mechanism via a resolution.
• Implementation timeline: The exact start date and duration of the surcharge, expected to be around three months.
• Fuel price trajectory: Continued monitoring of Jet A1 prices; if prices fall below $100/barrel, the surcharge would not apply.
• Airline earnings impact: Q1 and Q2 2026 earnings reports from HVN and VJC will show the actual effect of fuel costs and any surcharge revenue.
• Competitor response: How other airlines, including VJC, adjust their pricing strategies in response to the surcharge.