T

he Indonesian National Carriers Association (INACA) has called on the government to review the industry'€™s price ceiling so that airlines will be able to increase fares in order to help cope with rising operational costs caused by the sharp drop in the rupiah against the US dollar.

The chairman of INACA'€™s scheduled airline division, Bayu Sutanto, said Wednesday that the government should be more responsive following the depreciation of the rupiah. The rupiah breached 13,000 to the US dollar, its lowest level in six years, in early trading on Tuesday.

He said that even though the global oil price had dropped sharply since the middle of last year, operating costs had grown even higher because about 70 percent of airline spending, such as on aviation turbine fuel (avtur) and spare parts, was in US dollars.

The government should therefore provide more flexibility for airlines to increase fares, he added.

'€œThe ministry is allowed to revise the price ceiling every three months. We think that the government should begin to review the policy to help us cope with operational costs,'€ Bayu told The Jakarta Post on Wednesday.

According to Bayu, passenger purchasing power would only be temporarily affected by an increase in air fares and it would not hamper passenger growth this year.

In November last year, the Transportation Ministry issued Ministerial Regulation No. 51/2014 on a price ceiling, which is fixed with an avtur price assumption of Rp 12,000 per liter and a rupiah exchange rate of Rp 13,000 per US dollar. The rupiah has lost about 4 percent this year.

Garuda Indonesia president director Arif Wibowo, meanwhile, said the airline would push its revenue generator and conduct cost efficiency measures, without lowering its service standards, to deal with the plunging rupiah.

He added that the airline had anticipated the depreciation of the rupiah through cross-currency swaps to mitigate the risk of foreign exchange loss.

Sriwijaya Air senior corporate communication manager Agus Soedjono separately said that if the rupiah breached the 13,000 level, the airline, in cooperation with INACA, would consider proposing that the government impose a surcharge.

'€œWe can'€™t conduct efficiency measures on our operational costs as they are related to safety. Moreover, we are a medium-class airline so we can'€™t reduce our level of service,'€ Agus said.

Aviation analyst Gerry Soejatman previously said that the aviation industry would continue experiencing turbulence this year from the sharp depreciation of the rupiah as well as stagnant growth in airport capacity.

'€œWe predict the growth of passengers will not hit double digits this year, amid the depreciation of the rupiah that will affect people'€™s purchasing power as well as limit space at airports,'€ Gerry said.

Central Statistics Agency (BPS) data released earlier this week revealed that the number of domestic air passengers in January 2015 reached 4.7 million people, down 4.2 percent from the same period last year. The figure is also 14.9 percent lower than the number of passengers in December 2014, which reached 5.4 million people.