Government to lower price ceilings for domestic airfares

TRANSPORTATION BUSINESS - JAKARTA. The government announced on Monday that it would lower the price ceilings for domestic economic class airfares by 12 to 16 percent, of both low-cost carriers and full service airlines, particularly for planes with jet engines.

The new price ceilings will take effect May 15.

“The government will not directly intervene in fares, but through the Transportation Ministry, we have a responsibility to maintain the balance between the interests of airlines and passengers,” said Coordinating Economic Minister Darmin Nasution in a media conference on Monday evening.

The decision to lower price ceilings was made after the government held meetings with various stakeholders and after reviewing airfares and the impact on the economy, he added.

Darmin noted that in the first three months of 2019, increase in the air travel price index stood at 11.4 percent. The figure was the highest among increases for other transportation modes -- land transportation (1.69 percent), railway (2.4 percent) and sea transportation (2.01 percent).

The minister said high airfares had burdened not only households but also tourism players. He said inflation from air transportation reached 2.27 percent in April, 30.7 percent higher year-on-year.

Transportation Minister Budi Karya Sumadi said he would issue a ministerial decree on Wednesday that would become the legal basis for the new policy to replace Transportation Ministerial Decree No. 72/2019 on price floors and price ceilings, which was issued in March.

He said the ministry would disseminate information about the new policy to all stakeholders.

He said that the exact price ceilings would depend on the routes -- the price ceilings for destination in Java would be different from the price ceilings for less busy routes, such as those to Papua.