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span class="inline inline-left">It may not be the first time for Air Asia Group CEO Tony Fernandes to say “Indonesia is more than just Bali,” but this time around, the pioneer regional budget carrier has argued that government regulations may contribute to the reason tourists remain heavily focused on the Island of Gods.

Foreign tourist arrivals last year in Indonesia fell short of the 10 million target set by the government, while Malaysia welcomed 25.7 million tourists that year.

Fernandes acknowledged this, while mentioning that the foreign ownership cap set by the government created barriers for airlines like Air Asia in investing more and opening more routes to expose potential tourist sites in Indonesia.

“Many Chinese and Indians should be coming to Indonesia, but there’s no flights,” he said on Thursday.

“We want to invest more. But local partners don’t want to invest anymore because they have other businesses,” he said.

Fernandes went on to say that he would put more money into Indonesia AirAsia (IAA), the group’s Indonesian subsidiary, but was hampered by the 49 percent ownership cap for managing an airline.

The Transportation Ministry announced in May that of the 45 airlines that submitted financial performance reports, IAA had negative equity, meaning that its outstanding loans exceeded its assets. IAA is required to fix its financial performance by September or the airline risks having its operation permit revoked.

The ministry even went so far as to suggest a merger with its fellow Indonesian subsidiary specializing in long haul, low-fare Indonesia AirAsia X.

“If our shareholders don’t want to put in [the money], then we’re stuck. So we think ASEAN should try to look at ownership regulation, so that airlines can own more than 49 percent,” he said.

Airline ownership is on the negative investment list (DNI), meaning that foreigners are prohibited from owning more than 49 percent of an airline.

It was only recently that the government eased foreign ownership requirements for other aviation sectors, such as airport management, in which foreigners can own up to 67 percent.

Fernandes compared the situation to the practice in Europe whereby any EU-licensed airline could be in the hands of any EU national or member state.

Examples of such cases are British Airways being 55 percent owned by Spain-registered International Airlines Group, and Dutch KLM being jointly owned with Air France without any foreign ownership cap imposed.

The unfavorable ownership rule has also impacted businesses in the ASEAN region.

The largest homegrown low-cost carrier, Lion Air, which has units in Malaysia and Thailand, is also calling for the rule to be scrapped as it has suffered a similar ownership plight.

Lion has formed a joint venture with Malaysian National Aerospace and Defence Industries, with its Malaysian counterpart owning 51 percent to establish its Malaysian subsidiary, Malindo Air, among others.

“Until Air Asia and Lion, no one needed the change. Because no one makes investments in other countries. But now, airlines are doing it, it’s time to really look at it,” he said.

Fernandes stated that a merger to help mitigate the equity problem may not be on the horizon as he planned to turn IAA X into a charter airline.

Besides the ownership constraint, Fernandes also called for the government to revise its value added tax (VAT) for airline leasing, calling it the “only country in the world that has that”.

“It puts heavy penalty on the airline industry. You pay 10 percent VAT on a US$400,000 a month aircraft,” he said.