TheJakartaPost
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Quo vadis affordable domestic ticket price?
Ticket prices have remained unusually high and the current duopoly market structure seems to be a factor in the new phenomenon. But the market domination by the Garuda Indonesia Group and Lion Group does not automatically lead to anticompetitive behavior. There must be an indication of collusive price fixing or cartel arrangements. #opinion
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Empty commercial airplane seats viewed from the rear (Shutterstock/Martin Chavez)
The polemic over the controversy of what is publicly seen as excessive increases in domestic ticket prices has continued.
It appears too soon to assess the effectiveness of the newly introduced Transportation Ministerial Regulation No. 20/2019, which lowers the economy ticket ceiling prices of full-service airlines by a range of 12 to 16 percent.
Typically, airlines set higher fares during the peak season, which usually takes place during the Idul Fitri, Christmas and New Year festivities. Those high fares usually diminish over time. This time, however, that logic does not seem to apply.
Ticket prices have remained unusually high and the current duopoly market structure seems to be a factor in the new phenomenon. But the market domination by the Garuda Indonesia Group and Lion Group does not automatically lead to anticompetitive behavior. There must be an indication of collusive price fixing or cartel arrangements.
However, as game theory says, two dominant players do not even need to communicate to set equally high prices.
The situation makes it harder to prove the two groups are engaged in a price cartel. It explains the reason why the Business Competition Supervisory Commission (KPPU) has yet to make any conclusions after a few months of investigation.
The history of the airline business has traditionally been characterized by inefficiency and a very thin profit margin. It costs the owners a lot of money.
