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Local airlines must readjust airfares by Saturday
Local airlines are required to reduce the price of airline tickets for domestic routes no later than Friday after an adjustment to the new airfare price ceiling was made by the government early this week
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span>Local airlines are required to reduce the price of airline tickets for domestic routes no later than Friday after an adjustment to the new airfare price ceiling was made by the government early this week.
The government lowered the airfare price ceiling for economy class services on domestic flights by 12 to 16 percent on Wednesday. The policy applies to low-cost carriers and medium and full service airlines, but only for planes with jet engines.
The Transportation Ministry through the Civil Aviation Directorate General issued Decree No. 106/2019 on the implementation of the new airfare price ceiling, which replaced the previous Decree No. 72/2019.
“The new regulation was signed on Wednesday night, and scheduled commercial airlines must make readjustments at the latest two days after the decree was issued,” civil aviation director general Polana Bangun Pramesti told a press conference Thursday.
With the deadline set, airline rates must be changed before Saturday at the latest.
Polana said the price ceiling was changed in response to complaints over high airfares charged by local airlines, costing travelers millions of rupiah to fly home during Idul Fitri.
She said that with the reduction of the price ceiling, local airlines needed to prioritize safety and on-time performance (OTP). She also advised airlines to improve their cost efficiency, especially in terms of fuel use and operating hours, so that they could lower their airfares.
Polana said the regulation would be evaluated every three months. However, the government has the authority to review it at any time if necessary.
Meanwhile, Garuda Indonesia corporate secretary Ikhsan Rosan said the cut in the price ceiling would pressure airlines to improve performance given that a decline in ticket revenues necessitated a reduction in operating costs.
“With the new readjustment, we have to reduce our operational costs. Costs for safety and maintenance are cost components that cannot be interfered with, thus we might have to make changes to our service costs,” he said.
Ikhsan also said Garuda Indonesia might close nonprofitable and less crowded routes or decrease flight frequency.
The Indonesian National Air Carriers Association’s (INACA) head of scheduled flights, Bayu Sutanto, earlier said the price ceiling cut would worsen the financial position of most of the country’s airlines. High jet fuel prices and a weakening rupiah had contributed to an increase in airlines’ operating costs, he said.
“INACA opposed the cut in the price ceiling because costs, affected by high jet fuel prices and the rupiah exchange rate, the two main variables in determining the ceiling, have continued to increase in the last two weeks,” he said.
The association estimated that jet fuel comprised 40 to 50 percent of airfare costs, while aircraft leasing and maintenance each accounted for another 20 percent.
