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High oil price hampers recovery of Indonesian airline industry
Surging aviation fuel prices present a new challenge for airlines seeking to get back on their feet, as excessive airfare hikes could hurt demand.
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An aviation security officer is on patrol at the Garuda Maintenance Facility (GMF) AeroAsia at Soekarno-Hatta International Airport near Jakarta on Jan. 21. (Reuters/Willy Kurniawan)
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urging oil prices present a new challenge for airlines seeking to get back on their feet amid eased COVID-19 restrictions and are expected to delay the industry’s recovery.
The high cost of aviation fuel and air ticket price caps have compelled domestic airlines to cut flights so as to maintain profitability, and a recently announced permission for carriers to surcharge customers may only help to some extent as it could hit demand.
Prices of aviation fuel at Indonesia’s three busiest airports -- Soekarno Hatta, near Jakarta; Ngurah Rai in Bali and Juanda in Surabaya -- were up more than 60 percent year-on-year at US$1.04 per liter in the first two weeks of April, according to data from state-owned oil giant Pertamina.
The Indonesian National Air Carriers Association (INACA) said such high prices were disrupting a recovery hoped to conclude in 2024 with domestic air travel returning to the pre-pandemic level of 78.73 million passengers annually.
“So, this situation has slowed the airline industry's recovery. Maybe it could also push [the recovery] back by one or two years, we don’t know yet,” INACA secretary-general Bayu Sutanto told The Jakarta Post on April 12.
Read also: Global oil shock reaches Indonesia
The rise in aviation fuel prices reflects a surge in international oil prices, with the benchmark Brent price increasing roughly 65 percent to $103 per barrel over the same period, countryeconomy.com data show.
