Indonesian Airlines - Photo: Special

JAKARTA (TheInsiderStories) – Indonesia’ business competition supervisory commission said they found strong indications of duopoly behind the expensive airplane ticket prices since October 2018, the agency supervisory commissioner Afif Hasbullah told media in Jakarta on Monday (06/17).

Hasbullah adds the agency continues investigating alleged price-fixing behind airfare increases.

“We are investigating the issue because we could not rely on information from the media. It does not just ticket, these airlines’ duopoly is found everywhere,” he said.

Hasbullah added there are also indications that the two airline groups that dominate the aviation sector, PT Garuda Indonesia Tbk (IDX: GIAA) and Lion Air Group, also agreed to regulate the price of air cargo services—which rose at almost the same time.

The same indication was also found for sales of Umroh packages sold by travel agents appointed by the two groups.

The agency’s investigation of the alleged duopoly began in January, involving numerous institutions from airlines, government authorities, and experts.

Hasbullah said if airlines were found to have had agreements for fixing prices, either to raise or lower airfares, it could possibly be a violation of the 1999 Antimonopoly Law. According to the law, industry players and their competitors are forbidden from working together to set prices.

Said airline’s official was reluctant to comment much about the investigation. Garuda Indonesia’s commerce director Pikri Ilham Kurniansyah, whom the agency had asked statements from, said he has nothing to hide about the cartel allegation.

“We have been around for long and we have experienced many market changes. Of course, it is not a problem to us,” he said.

Meanwhile, a senior economist from the Institute for Development of Economics and Finance, Nawir Messi, said the domination of Garuda and Lion limits room from the competition. He said Indonesia needs an audit on this joint operation—is it legal, and can it change the competition in the domestic aviation market.

Dozens of people protested the price increase on Dec.20-Jan.11 by signing an online petition. The Indonesia National Air Carrier Association (INACA) agreed to reduce prices following the complaints.

However, many are not dissatisfied with the price cut because it did not take into account several taxes — passenger service charges, safety charge, and insurance.

The government through the Ministry of Transportation has issued two new rules related to airplane tariffs in April. With these rules, the government requested that airlines throughout Indonesia immediately comply by lowering their plane tickets.

According to Minister of Transportation Budi Karya Sumadi, the regulation was issued followed receiving suggestions and complaints from the public followed several months the domestic airline increased ticket fares and added paid baggage.

He said, the two rules that have been promulgated are Ministerial Regulation Number 20 of 2019 concerning Procedures and Formulations for Calculating the Upper Limit Limits of Economy Class Domestic Passenger Class Transportation Airline Passenger Services and Minister of Transportation Decree Number 72 the Year 2019 concerning Upper Boundary Rates for Economy Class Domestic Passenger Scheduled Air Transport Services Passengers.

“We are very concerned about the needs of the community or consumers to travel by airplane. On the other hand, we also protect the sustainability of the Air Transport Business Entity,” he said in Jakarta.

Sumadi explained, in this regulation, the government changed the lower limit tariff rule to 35 percent of the upper limit tariff, which was imposed today. Previously, the lower limit rate was only 30 percent of the upper limit tariff. Then, the government officially reduce the upper limit of airfare tariff between 12 percent to 16 percent. It’s effective starting last month and will be continuously evaluated based on applicable regulations.

Written by Willy Matrona, Email: theinsiderstories@gmail.com