INACA Board Provided Information about the Reduction of Airlines Ticket Prices (01/13) - Photo: Special

JAKARTA (TheInsiderStories) – Amid the criticism of airfare tariff, the National Air Carrier Association (INACA) reduced ticket prices 20 to 60 percent from current prices. Recently, many flight carrier tickets were sold at high prices.

The public claimed about the price of airline tickets for domestic flights that expensive even in low season in a petition to President Joko Widodo, Minister of Transportation Budi Karya Sumadi, Minister of Finance Sri Mulyani Indrawati, President Director of PT Garuda Indonesia Tbk (IDX: GIAA) and PT Lion Air.

In the press statement on Sunday (01/13), chairman of INACA Ari Askhara ensures that the ticket prices can be sold without having to range at the upper limit. He stressed the planned has get support from the regulator and the airport operator PT Angkasa Pura (AP) I and II, PT Airnav Indonesia, also state-owned energy producer PT Pertamina.

CEO of AP II Muhammad Awaluddin admitted, have discussed with airliners and some of the direct costs will be lowered, such as aircraft landing, placement, storage services, and fee charged to the passengers. He added, “It will become a component which could reduce the operational costs of the airline.”

Previously, Minister of Transportation Budi Karya Sumadi, said that the government will continue to monitor the determination of the flight tariff. He ensured that all ticket sales carried out by the airline were still within the tolerance limit of the existing rules.

Askhare assured the adjustment ticket price had begun since Friday (01/11) at several flight routes, such as Jakarta-Denpasar, Jakarta-Jogja, Jakarta-Surabaya, Bandung-Denpasar, and others. He added that the decline in airplane ticket prices will continue with other domestic flight routes.

According to him, the airfare tariff is high caused the aviation turbine fuel (avtur) quite high. Askhara stated, “The biggest component is avtur, accounts for 40 to 45 percent of airline costs.”

Another reason is the cost of renting an airplane around 20 percent of the total airlines costs, the strengthening of  US dollars, and other costs like terminal and airport facilities of around 10 percent. In addition, he added, demand and supply in the market was also one of the factors to the high of the ticket price.

In August 2018, the Ministry of Transportation released the provision airline fare lower limit amid of soaring jet fuel prices and the weakening of Rupiah. The minimum airfare to 35 percent of the ceiling price from previously 30 percent.

The move is not popular among low-cost airlines which relies on cheap tickets to attract passengers but will certainly help flag carrier GIAA, which sees its market share eroded by the popularity of budget airlines like PT Indonesia Air Asia Tbk (IDX:CMPP) and Lion Air.

He stated that the changes have gone through the calculations and discussions with various parties, including businesses and associations of business aviation. But, Sumadi stressed, the decision will discussed again with the Coordinating Ministry for Maritime Affairs.

Baggage Tariff

Beside the airfare tariff, Indonesian airlines were hotspot talking, after three airlines Lion Air, Wings Air and PT Citilink Indonesia decided to charge their baggage tariffs. The decision was considered to have the potential to increase flight tickets and losses for passengers, let alone suddenly delivered and considered inappropriate.

Lion Air Group‘s first free baggage removal in its two airlines, Lion Air and Wings Air, on Jan. 4, followed by Citilink on Jan. 10. However, it was postponed after receiving a response from the government.

However, the Indonesian Consumers Foundation considers Lion Air’s policies to be very counterproductive with services provided such as poor safety, cabin service and also luggage problems of lost passengers. Although according to existing regulations, airline fares for consumers are becoming more expensive and undermining claims from low-cost airline fares in Indonesia.

Actually, the provisions of this baggage have been regulated in the Minister of Transportation Regulation Number 185 Year 2015 concerning Passenger Service Standards for Economy Class Domestic Scheduled Commercial Air Transport. In article 22, stated that airlines that service drinks (no frills) are allowed to charge fees for baggage.

Therefore, this policy is also considered to have the potential to match the rates of full service airlines such as Garuda Indonesia and Batik Air. While Lion Air and Citilink services are still low cost carrier based. The observer Alvin Lie asked the government to immediately regulate the fairness of baggage prices for low-cost airlines or LCC.

Written by Daniel Deha, Email: theinsiderstories@gmail.com