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Airlines cut fares to adjust to price ceiling
Indonesia’s major airlines have lowered their fares following the implementation of the new price ceiling on Saturday
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Indonesia’s major airlines have lowered their fares following the implementation of the new price ceiling on Saturday.
For Monday flights from Jakarta to Bali direct, Lion Air offers tickets for between Rp 842,200 (US$58) and Rp 1,227,200, Citilink’s fares range from Rp 1,376,100 to Rp 1,407,600, Sriwijaya Air tickets cost Rp 1,505,700, Batik Air’s flights range from Rp. 1,633,300 to Rp. 1,665,400, and flying with Garuda Indonesia would cost Rp 1,709,100, kompas.com reported.
Garuda’s airfare for the Jakarta-Bali route is lower since Thursday, when a Garuda ticket for the route was sold at Rp 1,914,800. Batik Air tickets for the Jakarta-Bali route were priced at Rp 1,579,600 on Thursday.
For the Jakarta-Yogyakarta route with a departure date on Monday, Lion Air has set a price of Rp 723,400, Sriwijaya Air Rp 813,200, Citilink Rp 874,100, Batik Air Rp 858,900 and Garuda Indonesia Rp 1,081,000.
Compared to Thursday’s airfares, the price of Garuda’s airfares for the Jakarta-Yogyakarta route has decreased. On Thursday, a Garuda ticket for the same route was sold at Rp 1,211,900 and Batik Air tickets cost Rp 981,200.
For the Jakarta-Padang route with a departure date on Monday, Lion Air offers an airfare of Rp 1,266,800, Sriwijaya Air Rp 1,550,800, Citilink from Rp 1,371,700 to Rp 1,449,400, Batik Air Rp 1,591,500 and Garuda Rp 1,758,600.
Garuda and Batik Air tickets for the Jakarta-Padang route have also dropped since Thursday, when Garuda tickets were offered at Rp 1,974,200 and Batik Air flights at Rp 1,664,300.
Sriwijaya Air Group’s president director Joseph Adriaan Saul said on Friday as an adjustment to the new ceiling price the airline would set its airfares at 10 percent below the price ceiling. For example, beginning this week, tickets for the Jakarta-Surbaya route will be sold at Rp 1,050,000 compared to the new ceiling price of Rp 1,167,000. Meanwhile, with the previous ceiling of Rp 1,372,000, Sriwijaya Air’s tickets for the route were offered at Rp 1,234,800.
Joseph said with the new ceiling, the airline’s fares would decline by an average of 15 percent.
“[With the new price ceiling] according to our internal calculation we could lose Rp 190,000 per ticket,” he said.
To cope with the situation, the airlines would restructure and recalculate the profit potential of each route. Joseph said cost efficiency measures would be carried out.
“We may conduct cost efficiency measures in our service. For instance, if in the past we gave two slices of bread to the customer we may decrease it to one. We will also maximize our ancillary revenue, such as preferred seat, baggage fee, meal, to make up for the potential revenue decrease” he said.
Several nonprofitable routes such as short distance routes in eastern parts of Indonesia such as Sorong-Manokwari and Tambolaka-Kupang, which previously received cross subsidies from profitable routes, may also be reduced or even stopped, Joseph said.
Garuda Indonesia’s corporate secretary Ikhsan Rosan told The Jakarta Post that the airline would comply with the new policy. However, the airline would implement cost efficiency measures so that the cut in the airline’s airfares would not seriously affect revenue.
The Transportation Ministry through the Civil Aviation Directorate General signed on Wednesday Decree No. 106/2019 on the implementation of the new airfare ceiling prices, which replaced the previous Decree No. 72/2019.
In the new decree, the government reduced the airfare price ceiling by between 12 and 16 percent for economy class in the scheduled commercial airline, but only for planes with jet engines. The policy applies to low-cost carriers, medium service to full services airlines.
In the new decree, the price ceiling for Denpasar-Jakarta is reduced to Rp 1,431,000 from Rp 1,651,000 previously. Meanwhile, the Surabaya-Yogyakarta (Adisucipto International Airport) route is lowered to Rp 804,000 from Rp 941,000. The Jakarta-Jayapura route’s ceiling is lowered to Rp 4,621,000 from Rp 5,473,000. For the Banda Aceh-Jakarta route, the ceiling is cut to Rp 2,228,000 from Rp 2,657,000.
