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YLKI expects new airfare regulations to end price war
The Transportation Ministry's new regulations set a higher price floor for domestic routes.
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A Boeing 747 aircraft bears the livery of Lion Air. (kontan.co.id/Cheppy A Muchlis)
T
he issuance of new airfare regulations that introduce a higher price floor will likely end the era of cheap airfares that triggered a price war among airlines, according to the Indonesia Consumer Foundation (YLKI).
“This indicates strongly that the era of cheap airfares will soon come to an end, or have already ended,” said YLKI chairman Tulus Abadi in a statement The Jakarta Post received on Sunday.
“From now on, consumers will enjoy airline ticket prices based on real costs, not the cheap fares that created a battlefied among airlines [over fare prices] and caused unhealthy competition,” said Tulus.
Previously, the Transportation Ministry issued a ministerial regulation and a ministerial decree on airfares.
Transportation Ministerial Regulation No. 20/2019 mandates a fare pricing mechanism for airlines, while Transportation Ministerial Decree No. 72/2019 stipulates a price floor and price ceiling for economy class seats on each scheduled route of domestic commercial airlines.
The price floor for airline tickets is 35 percent of the price ceiling, whereas previously, the the price floor was 30 percent of the price ceiling. The new regulation thus introduces a higher floor-to-ceiling ratio, which could prompt airlines to set higher minimum fares for flights.
“On the other hand, with the increased price floor, airlines are expected to lower the [upper range] of their ticket prices, and the ticket prices are expected to become more reasonable,” said Tulus. He added that the YLKI had urged the government to improve its supervision of regulatory implementation.
The Transportation Ministry expected the new regulations to help lower ticket prices to make air travel more affordable for a broader range of customers, while considering profit for the aviation business. (bbn)
