Demand for new air travel pricing scheme

We do not have any other choice but to apply a surcharge even though it increases airfares.

The Indonesian National Air Carrier Association (INACA) has demanded the government conclude its talks on the new air travel pricing scheme because the existing system does not benefit airlines.

INACA secretary general Tengku Burhanuddin said that airlines had been burdened by the high operational costs resultant from the out-of-date pricing system, or “ceiling price” mechanism, which was based on a four-year-old calculation.

“Cost components strongly related to operating costs, such as the depreciation of the rupiah against the US dollar, inflation and the price of avtur [aviation turbine fuel], are much higher now than four years ago,” Tengku said on Monday.

The rupiah, for instance, passed Rp 12,000 per dollar last week, alarming operators that pay for most of their activities such as aircraft leasing and avtur consumption in dollars but their income is in rupiah.

Meanwhile, the price of avtur in some regions across the archipelago, particularly in East Nusa Tenggara, Maluku and Papua, has hit more than Rp 10,000 per liter over the past six months.

Tengku also said the provincial minimum wage, which had increased by an average of 13 percent this year, had further burdened INACA members.

“We are hoping that a solution is found as soon as possible because we need to keep the aviation business in good shape for the interest of customers,” he added.

According to Transportation Ministry Regulation No. 26/2010 on the ceiling price mechanism for scheduled flight services, the maximum price for the Jakarta–Denpasar route is Rp 1.48 million ($125.8); Jakarta–Makassar,
Rp 1.85 million; and Jakarta–Padang, Rp 1.43 million. The price excludes 10 percent value-added tax, insurance and passenger service charge or airport tax.

Full-service carriers such as Garuda Indonesia and Batik Air are allowed to charge up to 100 percent of the ceiling price, while medium- and low-cost players can only charge up to 90 percent and 85 percent, respectively.

He said the association had sent its calculation to the Transportation Ministry a couple of months ago and it was waiting for further communication. Contacted separately, ministry spokesman Bambang S. Ervan said that the air transportation directorate general had recently finalized its own calculations and planned to summon related stakeholders to discuss the surcharge mechanism this month.

“We will discuss the calculations from both sides carefully in order to create the fairest tariff for operators and customers. We understand that the operators are facing tough times but we cannot forget the customers,” Bambang told The Jakarta Post.

However, he said that the ministry had not determined when the surcharge policy would be implemented as it was a quite complex issue that would affect the nation’s domestic airfares.

He also said that even after the regulator and operators had agreed on the scheme, the Office of the Coordinating Economic Minister would still need to approve the plan.

“The Transportation Ministry will be able to issue a regulation once it is approved,” he said.