KPPU finds leads to probe airline cartel

The Jakarta Post ,  Jakarta   |  Thu, 11/05/2009 10:35 AM  |  Business

The Business Competition Supervisory Commission (KPPU) revealed Wednesday that a preliminary investigation into an alleged price fixing ring on fuel surcharges had unearthed enough evidence for a legal case against local airlines.

KPPU commissioner Anna Maria Tri Anggraini told The Jakarta Post fuel surcharge rates imposed by local airlines stayed at “unreasonable levels” regardless of fluctuations in global crude oil prices.

Theoretically, Anna said, such a situation was only possible if the airlines conspired to create a price-ring with the sole interest of price fixing.  Such practices might be considered as a cartel and violate the Law No. 5/1999 on Monopolies and Unlawful Business Practices, she said.

The preliminary investigation, which began on Sept. 28, suggested that there were 12 companies allegedly involved in the cartel since Sept. 28, 2009.

The only domestic flight operator that was not involved in the case is PT Indonesia AirAsia as it no longer imposes a fuel surcharge, she said.

Anna said the preliminary investigation would conclude on Nov. 6 and would be followed by another round of investigation that would  take about two months, resulting in a final conclusion.

KPPU investigators suspected that companies had intentionally imposed  high fuel surcharges to minimize basic ticket prices to attract more passengers. Airlines then advertised their cheap flight ticket prices but later charged an additional fee called a “fuel surcharge” when passengers arrived at the airport, KPPU spokesman Ahmad Junaidi said.

In the middle of 2006, the Indonesian National Carriers Association (INACA) began to impose a fuel surcharge of Rp 20,000 (about US$2.09) on domestic airplane passengers to help the airlines cope with surging operating costs resulting from the sharp increases in fuel prices at that time.

Junaidi said when the oil prices began to come down by the end of 2008, airline companies still kept charging passengers with additional fuel surcharges.

Hana Simatupang, spokeswoman for Sriwijaya Air denied involvement in cartel practices.

“That is our own policy due to the high fuel costs. We calculated the fuel surcharge based on current oil prices plus a 20 percent [margin] for security,” she told the Post.

The Post tried to contact Garuda Indonesia’s president director and spokesman, Emirsyah Satar and Pujobroto respectively, as well as Lion Air’s spokesman Hasyim Arsal Al Habsyi, but all three were not available to make comments.

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