The cap on domestic airline tickets will be applied on four kinds of flights.

New airfares for flights with a distance of less than 300km, 300-500km and 500-850km and more than 850km will cost VND682,000; VND864,000; VND1.182 million and VND1.819 million, respectively.

With the increase, the cap for a one-way airfare on Ha Noi-HCM City route will go up to VND2.03 million (inclusive of tax and airport fees) from the current VND1.811 million.

Vu Van Chinh, deputy head of the Ministry of Finance's Price Management Department, said the ceiling on fares had remained unchanged since 2008 while input costs in the aviation industry fluctuated greatly.

In addition, the cap lift will also help airlines offer more flexible fares based on demand and supply of routes, according to each month, day and even hour, Chinh said.

The exchange rate between the US dollar and the local currency also affects the industry's operation, and there will have to be another adjustment if the exchange rate fluctuates strongly, he said.

Hoang Thanh Quy, deputy head of Vietnam Airlines' Sales and Marketing Department, said the airlines would launch a wide range of airline fares, with the highest fare equalling the cap of VND2.03 million and the lowest 25 per cent under the cap.

In addition, it will also launch promotion programmes during the non-peak travel season.

The budget airline Jetstar Pacific applies 12 levels of airfares, with the highest price at VND2.03 million. But this accounts for 10 per cent of total tickets, and the remaining tickets are inexpensive.

Currently, Vietnam Airlines and Jetstar Pacific serve Viet Nam's domestic market.