Indonesian Airlines - Photo: Special

JAKARTA (TheInsiderStories) – Indonesian President Joko Widodo had planned to apply the open sky policy by allowing foreign airlines to operate in Indonesia. The President asserted this decision has been taken to allowed a better competition of ticket prices.

He said, the government had tried to reduce plane ticket price by lowering the upper limit prices and increasing the lower limit prices. In addition, the prices of jet fuel have also been reduced but the price still expensive over the low competition in the country.

So far, two main players in Indonesia are state-owned flight carrier PT Garuda Indonesia Tbk (GIAA) and private airlines PT Lion Mentari Airlines. Widodo expect the new policy will bring the competitiveness among the local players.

Recently, Indonesian government officially reduce the upper limit of airfare tariff between 12 to 16 percent. The tariff reduction applies differently, depending on the flight route served by the airline.

“The government will reduce the upper limit tariff. Not the same between routes one and the other. Its in the range of 12-16 percent,” said Coordinating Minister for Economic Affairs Darmin Nasution in Jakarta, on May 13.

He added, the policy taken because the government noted that there had been an increase in air passenger fares by domestic airlines since the end of December 2018 and this rate had not dropped after Jan. 10, 2019.

The impact was felt by the community as consumers, and also the perpetrators of tourism in the country, especially before the Eid Fitr season and identified as a national issue.

It is known, the upper limit  rates for domestic scheduled commercial air transport services, as stipulated in the Minister of Transportation Decree No.KM.72/2019 has not changed significantly since 2014. That one of the reasons that air passenger transportation rates have not dropped.

According to him, another condition that causes high the fligt fares increased caused of the aircraft fuel (avtur) price. At the end of December 2018, jet fuel prices touched US$86.29 per barrel, the highest since December 2014.

This resulted in an increase in the operating expenses of airline companies so that they needed to be compensated by an increase in airplane fares.

Moreover, Minister of Transportation Budi Karya Sumadi said that by paying attention and calculating the cost of goods sold from the full services airline, then according to the provisions of the Act, the Ministry of Transportation could adjust the new upper limit tariffs.

“We set the upper limit in the range 12-16 percent only for jet types and not for propellers,” he said while appealing for low-cost carrier flights to be able to immediately adjust and provide space up to 50 percent of the upper limit tariff.

Statistics Indonesia reported last week, it was seen that the transportation sector’ contribution to national GDP was very small, which was only 5.52 percent, or just up 0.13 percent from 5.39 in the fourth quarter of 2018.

The dominant factor from the stagnant growth was the increase in plane tickets since January had triggered a decline in the number of tourists so that the performance of the tourism sector in the first quarter of 2019 declined.

President Joko Widodo in his reign has placed tourism as a priority sector, for example by nominating 10 national strategic tourism areas. In addition, the government has also boosted the construction of airports and ports to open access to new tourist areas.

However, the policy was not supported by the mentality of the transportation industry which tended to take advantage of tourism potential to reap profits by raising the standard of service and airline tickets and similar transportation.

The ticket increase policy itself has backfired the airline, where throughout January-March 2019, airlines with an airport axis under the management of PT Angkasa Pura II lost 4 million passengers. This condition automatically reduces the income of the airline concerned.

by Linda Silaen, Email: linda.silaen@theinsiderstories.com