Proposal to Adjust Flight Rates in Indonesia: Removing Upper Limit Tariff Rule

Jakarta –

The Indonesian Air Carriers Association (Inaca) proposes that flight rates be adjusted to market mechanisms. The association asked for the upper limit tariff rule to be removed.

According to him, determining airline ticket rates must be reviewed to provide flexibility for airlines in adjusting their rates. This is considered to be able to provide sustainability for the aviation business in Indonesia.

“One of our suggestions, if possible, is to eliminate the upper limit tariff, so that ticket prices will be handed over to market mechanisms,” said INACA General Chair Denon Prawiraatmadja after holding the INACA General Meeting of Members (RUA), in Jakarta, written on Saturday (5/11/ 2023).

According to him, currently airline operational costs are too high. The two main things that make airline operations swell are the increasingly expensive price of aviation fuel and also the United States Dollar exchange rate which continues to strengthen.

The last adjustment to the upper limit tariff for flights was carried out in 2019. Since then until now there has been no review of the upper limit tariff, even though as stated by Denon, aviation fuel prices continue to rise and the US dollar exchange rate continues to strengthen.

“Improvements to flight tariffs need to be carried out immediately because the current tariffs were set by the government in 2019, where conditions at that time were different from today, especially in terms of aviation fuel prices and the rupiah exchange rate against the US Dollar,” explained Denon.

This kind of proposal has often been voiced by aviation entrepreneurs. Previously, at the National Aviation Day Seminar, on October 27 2023, the President Director of Lion Air Group, Daniel Putut Kuncoro Adi, said that the TBA regulations were indeed problematic. At the very least, the government should carry out a review of the existing tariff limits.

Through this step, Daniel said the burden on the aviation industry could be reduced through more flexible fare adjustments.

“Even by selling the upper limit, we still don’t make a profit, if we’re talking about profit, yes. But we have to obey the government, so we’re moving in that direction. Please work together to find a solution so that the aviation industry continues to exist,” said Daniel.

His party is also currently facing other challenges due to the weakening of the rupiah exchange rate against the dollar and the Hamas-Israel war. This condition causes a number of operational cost components to increase, therefore tariffs should also increase.

“We are approaching the government in particular. Don’t let the burden be too heavy on the aviation industry. Because if for example the biggest component for an airplane is fuel, we can’t afford it, automatically with the prices set by the government we won’t be able to move, we won’t be able to run. ,” explained Daniel.

Garuda Indonesia President Director Irfaniaputra has also openly complained about domestic flight fares being set too strictly. According to him, the regulations regarding upper limit tariffs and lower limit tariffs (TBA-TBB) make it difficult for airlines to determine an appropriate selling price for their business.

This affects the profits obtained. According to him, in business terms, limited tariffs make it difficult for companies to obtain optimal profits. In fact, with the current upper limit rates, even if there is full aircraft occupancy, the profit is still not much.

“Domestic is bound by the TBA-TBB regime, we can’t sell that price freely. If one maximum price is applied on one route then we fly at 90% and it’s still a minus, right, only stupid people want to fly onward,” said Irfan when talking together detikcom at his office, Soekarno-Hatta Airport Complex, Tangerang, last July 2023.

According to Irfan, this complaint has been raised several times to the Ministry of Transportation. Irfan also firmly suggested that the limit tariff provisions should be eliminated. However, so far this proposal has been flatly rejected by the Ministry of Transportation as the regulator.

“That’s why we are also continuously discussing with the Ministry of Transportation, we think that it would be better if tariffs were freer in determining prices. So far this has been rejected,” said Irfan.

“We are still discussing it, rather than making a mistake, it’s better to just open it, so we can sell it at a price that we think is profitable,” he said.

(hal/kil)

2023-11-05 15:45:08
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