The high price of airplane tickets in Indonesia has garnered public attention, and the Coordinating Minister for Maritime Affairs and Investment, Luhut Binsar Pandjaitan, has also addressed this issue.
Indonesian airfares are recorded as the second highest in the world, with only Brazil having higher fares. Within ASEAN, Indonesia has the highest average airfare.
Dwi Ardianta Kurniawan, a Transportation Economics expert and senior researcher at the UGM Center for Transportation and Logistics Studies (Pustral UGM), acknowledges that domestic airfares in Indonesia are generally more expensive than international fares.
He attributes this to several factors, including the more competitive nature of the international aviation market, the still-recovering availability of fleets post-COVID-19, and consumer demand that has essentially returned to normal.
Although the government has regulated airfare prices through the Ministry of Transportation, setting upper and lower fare limits and approving airport passenger service charge (PSC) rates and other fees like fuel price increases, Dwi Ardianta Kurniawan notes that regulations are sometimes relaxed during peak periods, such as extended holidays, when demand is very high.
“Sometimes these regulations are left to the market, especially during high-demand periods,” he said on Tuesday, Aug. 8, 2024, at UGM Campus.
Moreover, fare structures vary depending on the type of service provided. Full-service airlines, such as Garuda Indonesia or Batik Air, typically have higher fares.
In contrast, low-cost carriers like Lion Air, Super Air Jet, Wings Air, Citilink, and AirAsia usually offer cheaper flights.
Given this situation, Kurniawan suggests that fiscal incentives could be a solution to address the high cost of airplane tickets in Indonesia.
These incentives might include subsidies for aviation fuel, aircraft spare parts, airport service charges, and direct operation cost subsidies such as fuel taxes and spare parts taxes for maintenance or overhauls.
Additionally, he proposes removing ticket taxes for airplanes to achieve parity with other transportation modes where taxes have already been removed, based on PMK Number 80/PMK.03/2012.
“Removing constants in the fuel price calculation formula, as outlined in the Minister of Energy and Mineral Resources Decision Number 17 of 2019 on the Basic Price Formula for Aviation Fuel Retail Pricing,” he explained.
Equally important, he believes the government should consider the Business Competition Supervisory Commission (KPPU) proposal to introduce a multi-provider system (to prevent monopolies) for aviation fuel supply.
“This is aimed at preventing monopoly practices and encouraging the implementation of multiple aviation fuel providers at airports, which is expected to create competitive fuel prices,” Kurniawan emphasized.
Regarding the high ticket prices potentially linked to airport maintenance costs, Kurniawan argues that this is not likely the leading cause.
He notes that airport fees cannot be increased frequently without approval from the Ministry of Transportation. If this were the determining factor, high prices would be consistent.
“High prices only occur at certain times, so it’s not necessarily an airport issue. Everything largely depends on fuel prices, exchange rates, and the availability of services on expensive routes,” he clarified.
Author: Agung Nugroho
Photo: Bursa Bisnis
Post-editor: Lintang