T

he government is planning to review the airfare ceiling for scheduled flights this year to help domestic carriers cope with increasing fuel prices and fluctuating exchange rates, but any increases will not come into immediate effect.

Transportation Ministry air transportation director Djoko Murjatmodjo will invite representatives from all carriers to discuss some of the cost components affecting airfares next month.

“We have not made any adjustment to the ceiling airfare for three years, while the market conditions have changed. One of the most concrete changes is in the price of avtur [aviation turbine fuel] that has been trading at more than Rp 10,000 [US$1.03] per liter for three months in a row in some regions,” Djoko told The Jakarta Post on Wednesday, adding that most of the places were in eastern provinces.

Fuel is a vital component of aviation costs, accounting for between 25 and 35 percent of the total operating costs of every airline.

Other major cost components include labour, maintenance and rentals fees for aircraft and space on the ground.

“The increasing price of avtur over the last three years has raised operating costs by up to 10 percent today, so we need to review the ceiling price,” he said.

Today’s ceiling fare is stipulated in the Transportation Ministry Regulation No. 26/2010.

The maximum airfare for the Jakarta–Denpasar route, for instance, is Rp 1,478,000 ($154), Rp 1,846,000 for Jakarta–Makassar and Jakarta–Medan stands at Rp 1,847,000.

This excludes a 10 percent value-added tax, travel insurance and passenger service charges or airport tax.

According to the regulation, full-service carriers are allowed to charge up to 100 percent of the ceiling, while medium and low cost carriers are allowed to charge up to 90 percent and 85 percent, respectively.

In addition, the depreciation of the rupiah has left it close to Rp 10,000 per US dollar and has contributed to the pressure for the government to recalculate the ceiling.

The regulator does not want air carriers to fall victim of increasing fuel prices, rising labour costs and exchange rate pressure.

“However, this does not mean that we are going to increase the ceiling immediately because we need a thorough calculation and analysis. We will also need input from the Indonesian National Air Carriers Association [INACA],” Djoko continued.

INACA secretary-general Tengku Burhanuddin said that the agency had already recalculated some cost components that affected airfares.

The association plans to report its findings to the Transportation Ministry this year.

“Some carriers are feeling the pinch of fuel price rises, inflation, and other cost increases such as the minimum wage. I think it is time for new calculations,” Tengku said recently.

At least 26 provinces have set their minimum wage for this year, with Bogor, West Java making the highest increase of 70.5 percent to Rp 2 million, from Rp 1.17 million in 2012.

Purwakarta, also in West Java, recorded the second-highest increase of 61.6 percent to Rp 1.69 million. Jakarta decided on a 44 percent rise.