The pandemic has hit the financial conditions of state-owned flag carrier PT Garuda Indonesia Tbk (IDX: GIAA) in the first semester of 2020 - Photo by the Company

JAKARTA (TheInsiderStories) – The Ministry of Transportation finally ensure the provision airline fare lower limit amid of soaring jet fuel prices and the weakening of Rupiah. Yesterday, the minister Budi Karya Sumadi announced to raise 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 PT Garuda Indonesia Tbk (IDX:GIAA) which sees its market share eroded by the popularity of budget airlines like PT Indonesia Air Asia (IDX:CMPP) and PT Lion Air.

“We put just beneath the 35 percent of the upper limit of the rates,” said Sumadi after giving a speech at the National Seminar on Transportation Sector Revival SOE on Tuesday (28/08).

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.

Chairman of the Indonesian National Air Carriers Association (INACA) Pahala Mansury welcomed this decision. He is hoping the new policy will give positive impact to the airliners in the country.

INACA sees that the airline’s flight costs are currently heavily affected by the high prices of aircraft fuels and the weakening of the Rupiah exchange rate. With the tariff increase, he said, at least airlines has an ability to adjust the increase in fuel management.

But, he said, there is a challenge for the flight carriers on the decision. Change of the lower limit rate could also re-occur in the near future on the economic developments, in particular on the issue of fuel jet as a major contributor in determining the ticket price.

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