Indonesia to increase ceiling on airfares

Indonesian Transportation Minister EE Mangindaan said his ministry was set to increase the airfare price ceiling for scheduled flights before his term ended on Oct. 20.

"Based on our calculations, we need to increase the price ceiling because airlines have been struggling to earn profits,"

Mangindaan said on the sidelines of Garuda Indonesia's From One Dollar to Billion Dollars Company book launch. "We will raise it if we receive no complaint from the public," he continued.

The Indonesian National Air Carriers Association (INACA) had asked the government to lift the price ceiling mechanism on busy routes as fares would still remain low because of tight competition.

National flag carrier Garuda Indonesia president director Emirsyah Satar echoed INACA's statement saying that the price ceiling should only be applied to new routes as the industry was facing declining revenues caused by higher fuel prices and the depreciation of the rupiah against the US dollar.

"We no longer consider flight services a luxury these days because of the public's interest in using the service.

Therefore, we will focus on ensuring the services will remain available for the public," Mangindaan said, adding that the incoming government's plan to increase fuel prices had also been taken into consideration.

Transportation Ministerial Regulation No. 26/2010 sets the following ceilings on airfares: Jakarta-Surabaya (East Java) flight was 1.2 million rupiah; Jakarta-Makassar (South Sulawesi), 1.85 million rupiah (S$127) ; Jakarta-Medan (North Sumatra), 1.84 million rupiah, Denpasar (Bali)-Sorong (West Papua) is 2.14 million rupiah, and Medan-Surabaya is 2.36 million rupiah.

The price excludes the 10 per cent value-added tax, insurance and passenger service charges or airport taxes.

Full-service carriers such as Garuda Indonesia and Batik Air are allowed to charge up to 100 per cent of the price ceiling,

while medium- and low-budget players can only charge up to 90 per cent and 85 per cent, respectively.

According to Mangindaan, the ministry will immediately conduct a public survey to garner the public's response to the plan because most airline passengers fly on low-cost carriers and are more vulnerable to price shocks.

Earlier this year, the ministry issued a tariff surcharge policy for domestic flights responding to demands from airlines facing an increasing avtur (aviation turbine fuel) price and the depreciation of the rupiah against the US greenback.