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Jakarta Post

Debate on airline price floor continues

  • Anton Hermansyah
    Anton Hermansyah

    The Jakarta Post

Jakarta   /   Mon, April 25, 2016   /  05:27 pm
Debate on airline price floor continues Airline industry players are currently split over whether there should be an industry floor price to improve safety in the industry. (Shutterstock/-)

Airline industry players continue to be split over whether there should be an industry floor price to improve safety in the industry.

Garuda Indonesia President Director Arif Wibowo said the price floor regulation was mandatory and must be obeyed, adding that while it might not totally eliminate the possibility of accidents, it still prevented predatory pricing among low-cost carriers.

“It is needed to stabilize the price competition among low-cost carriers in Indonesia. Different from other countries, Indonesia has a very tough market and we need to be wary of predatory pricing. This is the mandate of the law,” he said on Monday in Jakarta.

Due to safety reasons, the government has created a price floor and ceiling in the airline industry, after several accidents involving low-cost carriers. According to the rule, the minimum price that airlines can charge is 40 percent of the price ceiling.

“I have told the ministry to reduce the minimum price by 30 percent and I hope in time they will have the confidence to say that price is not related to safety. Personally, I don’t think they are linked but that is just my personal view,” Air Asia CEO Tony Fernandes told thejakartapost.com.

Centre of Strategic and International Studies (CSIS) department of economics head Yose Rizal Damuri said the government should enforce safety standards in the airline industry instead of regulating prices.

“There are some airlines that can offer high safety at a lower price. If the reason is safety, it would be better to create safety standards, because regulating the price means killing competition,” Yose told thejakartapost.com. (ags)

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