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Jakarta Post

Airfare debate continues as government still unhappy

  • News Desk

    The Jakarta Post

Jakarta   /   Wed, March 27, 2019   /   04:31 pm
Airfare debate continues as government still unhappy Garuda Indonesia aircraft (Shutterstock.com/e X p o s e)

President Joko “Jokowi” Widodo made a call to reduce airfares in response to the complaints by tourism-related-business earlier this month, but the government believes that the prices are still too high.

Coordinating Maritime Affairs Minister Luhut Pandjaitan has expressed his disappointment that airlines have failed to significantly reduce ticket prices to help boost tourism, particularly to improve hotel occupancy rates.

Luhut has reportedly given airlines until April to significantly reduce airfares, while Transportation Minister Budi Karya Sumadi said that the ministry would issue a regulation to bring down the price of airplane tickets.

“I will discuss [airfares] with staff. I will issue a regulation,” said Budi on Tuesday as quoted by tribunnews.com.

On Monday, Luhut, Budi and representatives of the airlines met to discuss the ticket prices. In the minutes of the meeting, Budi said the ticket prices were too high. He called on flag carrier Garuda Indonesia to lower its ticket prices, although the Garuda Indonesia Group – Garuda Indonesia, Citilink and Sriwijaya Air – had cut fares by 20 percent in February.

Previously, the Indonesian Hotels and Restaurants Association (PHRI) said that during this year’s low season, the occupancy rate of hotels declined by between 20 and 40 percent compared to the rates in the same season last year.

Aviation business analyst Gerry Soedjatman criticized the government for interfering in airfares. He said the government should refer to the existing regulation, namely Transportation Ministerial Regulation No. 14/2016 on airline ticket prices.

“They should not intervene in airline ticket prices. Because the ticket price is part of the business strategy of each airline. They can decide prices as long as they are still in the range between minimum and maximum prices,” Gerry said as quoted by tempo.co on Tuesday.

He believed that the insistence of the government on reducing airplane ticket prices had a political basis, particularly ahead of the April 17 presidential and legislative elections. He said the government could only make a call, but it could not force airlines to cut ticket prices.

Forcing airlines to reduce their prices would have negative long-term consequences for the airlines’ financial performance, he said, adding that it would lead to a deterioration the competitiveness of the country’s aviation industry.

He said the financial performance of the domestic aviation companies had not improved in recent years as a result of the government’s decision to cap fares at too low a level.

Garuda Indonesia spokesman Ikhsan Rosan said the company was still waiting for the government’s decision on ticket prices. “In principle, we have to be cautious in recalculating structural costs. But we will follow the government’s instruction,” he said on Tuesday. (bbn)