With only a few domestic airlines possessing ownership of aircraft, the Transportation Ministry is drafting a revision to a ministerial decree on airline services, requiring domestic airlines to own at least two planes, an official said Friday.
Most airlines in the country lease aircraft.
“Initially the new regulation will apply only to new companies applying for permits, but after a year, it will also apply to all domestic airline companies,” said Hemi Pamuraharjo, the domestic flights section-head at the Ministry.
The draft is currently under review by a ministry legal team and is expected to be in force by March.
“A few companies including Garuda and Merpati own several planes, but others mostly lease aircraft due to budget considerations,” he said.
According to ministry data, as of last year, 15 companies served domestic flights.
Several new companies, including Lorena Air, have obtained operation permits, but are not yet operational as they have yet to secure a lease or ownership of a plane.
Data from the Indonesia National Air Carriers Association (INACA) shows that as of last year, there were 195 domestic routes serving a total of 101 cities.
Hemi said the ownership requirement would improve the health of the airline industry as it would build companies’ asset base.
“We need to have a strong airline industry to compete amid the current global market liberalization. Some players may find this hard at the beginning, but I believe it will make our industry more competitive in the long run,” he said.
The draft also covers cooperation between airline companies, including ticketing and transfer of passengers to certain routes. It also addresses the problem of scalpers at airports.
“We are also discussing details regarding compensation for passengers when they face delays. Compensation for a one-hour delay should be different than a two-hour or three-hour delay,” Hemi said.
Mandala Airlines spokesperson Trisia Megawati questioned the purpose of the regulation, saying a company is not necessarily in a healthier financial position if it purchases planes rather than leasing them, as over the long-term the cost may be relatively the same. The legislation would simply force airlines to finance their aircraft procurement through other means than leasing arrangements.
Despite improving conditions in the airline industry, the government should focus more on efforts to meet international safety standards, she added. She said that Mandala Airline, which owns four planes, had tried to improve its safety by operating modern aircraft, applying good maintenance and providing first-class training for its crew.