Aviation Turbine Supply by Pertamina - Photo: Special

JAKARTA (TheInsiderStories) – Indonesian government admitted the high price of aviation turbine (avtur) caused by the high tax burden, said senior official on Tuesday (01/15). Beside tax, the increase in ticket prices was also influenced by the exchange rate of the rupiah against the US dollar.

This lead a large operating costs and pushed the ticket price for domestic airlines to be expensive. Minister of Energy and Mineral Resources (EMR), Ignasius Jonan stated, to compete with avtur prices with neighboring countries, like Singapore, there must be a reduction in the tax rate.

Actually the trend of rising Low Cost Carrier airlines ticket prices such as Lion Air, Wings Air and Citilink follows the pattern of the PT Garuda Indonesia Tbk (IDX: GIAA).

The Chairperson oft National Air Carrier Association (INACA) Ari Askhara admitted that the high price of avtur is the main factor for the airlines to raise ticket prices. In addition to avtur, the biggest composition is the cost of aircraft leasing, aircraft maintenance costs and employee salaries.

He said, the airline’s cost structure is very dependent on financing variables and the volatility of international market conditions. Last week, INACA had agreed to reduce airplane ticket prices by around 20-60 percent starting this month.

However, the levels of the decline in ticket prices has not been confirmed clearly and must be agreed by the airline companies. It was also made to revive the domestic aviation industry, which since 2018 has got a lot of financial turmoil.

State-owned energy producer PT Pertamina, as the sole seller of domestic avtur, acknowledged that the determination of the selling price to a number of airlines had already passed a mutual agreement on a certain period of contract.

“The price refers to Singapore’s Mean of Platts (MOPS). When world oil prices fall, avtur prices also experience adjustments. As principle, we believe our prices are competitive,” said one official at Pertamina Arya Dwi Paramita.

Furthermore, for non-regular flights, Pertamina will also apply different prices according to market conditions. Thus, normally that the price of aviation fuel at each airport varies.

But the government itself has not provided a plan to reduce the tax burden on sales and purchase of aviation fuel, so the discussion still ongoing.

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