Airlines Agree to Lower Fares
JAKARTA, KOMPAS – All airlines grouped in the Indonesian National Air Carriers Association (INACA) have agreed to reduce their fares on certain routes.
The decision comes following public complaints about high fares for domestic flights. Many airline customers signed a change.org petition complaining about high domestic fares during the year-end holiday.
However, some parties have said that airlines must increase their fares to survive under unfavorable conditions in the aviation industry. The price war could potentially worsen the situation.
INACA chairman Ari Askhara said in Jakarta on Sunday that fares had been slashed since Friday on certain routes, including the Jakarta-Denpasar, Jakarta-Yogyakarta, Jakarta-Surabaya and Bandung-Denpasar routes.
"Airfares will also be cut on other domestic routes," he said. The fare reduction ranges from 20 to 60 percent, depending on each individual airline’s decision. Airfares had returned to their normal 2018 rates faster than initially planned, as the airlines ended their Christmas and New Year’s promotional fares earlier on Jan. 10 from the originally scheduled Jan. 14.
Lion Air president director Rudy Lumingkewas said fares had been cut for certain subclass seats that accounted for 10-30 percent of available seats. "People should not book a flight at the last minute. Tickets will be more expensive the later they are booked," he said.
The decision to reduce fares was also supported by related aviation organizations, such as airport operators Angkasa Pura I and Angkasa Pura II, state-owned air navigation services company AirNav Indonesia and state-owned energy holding company Pertamina.
Angkasa Pura II president director Muhammad Awaluddin said that the company would return a portion of the payment for airport services to airlines, while AirNav Indonesia president director Novie Riyanto said it had decided to delay plans to increase air traffic service rates this month.
Transportation Minister Budi Karya Sumadi said he appreciated the decision to reduce airfares. "Of course, the fare cut was calculated carefully [...] according to national aviation regulations while still prioritizing safety," he said.
Price war
Earlier, the minister said that the fare increase over the year-end holiday was generally below the ceiling price. "Airlines have been engaged in a price war, so the prices have been cheaper. Once the fares have readjusted to their normal rates, they tend to seem very high," he said. Airlines had to increase their rates in order to survive.
Budi Karya said the situation could worsen if the price war continued. The airlines had no choice but to implement minimum service standards in order to compete. "We have to protect the airlines so that they will not suffer losses from cheap fares," he said.
Aviation observer Alvin Lie said that the global aviation industry generally experienced difficulties in 2018 due to rising aviation fuel prices. If airlines did not raise their fares, they would collapse.
Regarding the criticism that domestic flights were more expensive than international flights, Alvin said this occurred because the domestic price for aviation fuel was higher than in overseas markets. The price of aviation fuel in Indonesia, for example, was 20-30 percent higher than in Malaysia.
In addition, several national governments, such as Singapore, provided incentives to airlines to open direct routes from new areas to Singapore. "The incentives are promotional costs of US$100,000 annually. The Singaporean government is offering the initiative to increase the number of tourists to the country," he said.
Indonesian Consumers Foundation (YLKI) executive director Tulus Abadi said that public complaints about airfares had increased because low-cost airlines had also begun to charge for baggage. "The government must provide incentives to the aviation industry so that airfares remain affordable," he said. (ARN/E18)