Airfare ceiling price to be reduced next month

January 26, 2016, 10.10 PM | Source: The Jakarta Post
Airfare ceiling price to be reduced next month


JAKARTA. The Transportation Ministry has confirmed that it will cut the airfare ceiling price for economy-class flights by 5 percent following a slump in the oil price.

“It will be effective as of next month,” the ministry’s director general for air transportation Suprasetyo said on Monday.

He added that the document had been signed by Transportation Minister Ignasius Jonan and had been handed over to the Law and Human Rights Ministry.

Suprasetyo cited decreasing aviation fuel prices as one of the reasons for the decision, which was expected to lead to decreases in total operating costs (TOC).

He said that the ministry had also taken into account the volatility of the rupiah against the US dollar.

“If the fuel price goes up again, it will be adjusted again,” he said.

Earlier this month, state oil and gas firm Pertamina announced that it would decrease aviation fuel prices by Rp 143 per liter on average, from the period of Jan. 15 to Jan. 31, in response to the slumping oil price.

For the country’s main airports such as Soekarno-Hatta International Airport, the price of fuel has decreased to Rp 170 per liter. Brent Crude was priced at US$31.27 per barrel on Monday, according to data acquired from Bloomberg.

Indonesian Air Carriers Association (INACA) secretary-general Tengku Burhanuddin said that reductions in the ceiling price had come about “too soon”.

“With the fluctuating aviation fuel price and a weakened and volatile Rupiah against the dollar, these conditions make it too soon to break the ceiling price,” he said.

Tengku added that airfare tickets could be determined by competition between the airlines, as well as supply and demand.

Meanwhile, Albert Burhan, the president director of Citilink, the low-cost arm of national flag carrier Garuda Indonesia, said the policy could cause revenue losses for his company during the peak season.

“During the peak season, when we could have sold the tickets for higher prices, we won’t be able to. For the off-season, there’s no problem. We rarely use the ceiling price anyway,” he said recently.

However, he said the policy was fair because the airfare ceiling price had also increased during hikes in the oil price.

Voicing a similar statement, private carrier PT Sriwijaya Air corporate communications senior manager Agus Soedjono said the impact would be most visible during the peak season.

“For now until April, the market is still in the off-season,” he said.

Agus also said the government should make an effort to reduce volatility in the rupiah.

Meanwhile, national flag carrier Garuda Indonesia president director Arif Wibowo shrugged off the reduced price, stating that airlines did not always base their airfares on the ceiling price.

“There will always be external pressures. As long as the macroeconomic condition gets better, with efficient fuel, it will drive the economy and the airline industry,” he said. (Farida Susanty)

Editor: Yudho Winarto

Latest News