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Indonesia: New regulations set price floors, ceilings for airline tickets
The Transportation Ministry issued on March 29 new regulations on airfare, namely Transportation Ministerial Regulation No. 20/2019 and Transportation Ministerial Decree No.72/2019, to regulate airline ticket prices for economy class services of commercial airlines.
The ministry expects the new regulation to protect consumer purchasing power, allowing passengers to enjoy airlines services. The regulation is also expected to end the debate on airfare, with some saying that rates are too high.
The ministry’s Civil Aviation Directorate General secretary, Nur Isnin Istiarto, said the new regulation regulated the procedure of calculating and formulating airfares in general, while the decree specifically regulated price ceilings for all routes.
The regulations also contain stipulations that must be fulfilled by airlines when setting rates.
“With the new regulation, in determining the fares for each route, the airlinesneed to take into account the input from service users and consumer protection and pay attention to unfair competition. The airlines also need to properly disseminate [information on the fares],” said Isnin.
According to the new regulation, the price floor for tickets (TBB) is set at 35 percent of the price ceiling for tickets (TBA). Previously, the TBB was set at 30 percent of the TBA, meaning the TBB increased 5 percent.
The TBB for the Jakarta-Surabaya route by jet plane, for example, is now Rp 480,000 (US$33.76), while the TBA is Rp 1,372,000. Meanwhile, the TBB for the Denpasar-Jakarta route was set at Rp 578,000 and the TBA at Rp 1,651,000. Airlines can determine their own prices as long as they set them within the regulated limits.
Transportation Minister Budi Karya Sumadi said the ministry observed a tendency of increasing airfare rates recently. The government, meanwhile, conducted discussions with relevant parties, including airlines, to allow business players to have a say on rates.
“For now, we hope the airline will carry on with the new regulations so we do not have to make more rigid rules such as regulations for subclasses. The [aviation] industry could be more independent but at the same time still adhere to the applicable regulations,” he said in an official statement.
The two new regulations are revisions of Transportation Ministerial Regulation No. 14/2016. Previously, airfare limits were calculated based on the single regulation. Now, stipulations are split between a ministerial regulation and a decree.
Civil Aviation Directorate General director Polana B. Pramesti said that, with new decree, the directorate general could regularly assess the airfares every three months or any time there is a significant change in price that could affect business within the air transportation industry.
Responding to the new regulations, Garuda Indonesia corporate secretary Ikhsan Rosan said the national flag carrier was ready to adjust to them.
“Actually, not much has changed from the [old] regulation. The airline as an operator will definitely support the new regulations as we believe that the government considered all stakeholders [in drafting them],” he said on Friday.
Ikhsan said Garuda Indonesia began offering on March 31 a 50 percent discount for passengers to celebrate the 21st anniversary of the airline, which is a state-owned enterprise. He said the discounted air tickets were introduced independently of the new regulations and denied that the government pressured the company into bringing down its rates.
Meanwhile, Lion Air Group, which comprises Lion Air, Wings Air and Batik Air, announced on Saturday that it brought down its airline ticket prices for all routes.
“The amount in airfare reduction is determined by the route,” Lion Air spokesperson Danang Mandala Prihantoro told The Jakarta Post on Sunday.
“Lion Air Group will comply with the regulation and policy from the regulator for the benefit and in the interest of all parties.”
Indonesia Consumers Foundation (YLKI) chairman Tulus Abadi said the new regulation would likely end the era of low airfare costs.
“Hopefully, with the increase in the price floor for tickets, airlines could bring their price ceilings for tickets down. As a result, airline ticket prices could decrease to a reasonable price,” said Tulus on Sunday.
Tulus said the YLKI would also urge the Transportation Ministry to supervise the implementation process for the regulations.
Airline ticket prices have been under the spotlight since earlier this year, when people filed complaints on price surges that lasted until early January, even though the high season ended after the Christmas and the New Year holiday season.
Even though the airfares then were reportedly within the price ceilings and floors, consumers were still surprised about the surge in ticket prices.
Indonesia National Air Carriers Association said it would reduce prices during a press conference on Jan. 13 following the complaints. However, many consumers and business players said they did not feel the effects of the change. The Indonesian Hotel and Restaurant Association, for example, said the high rates had affected tourism, resulting in lower occupancy rates for places of lodging.
High operational costs, including high fuel costs, is the reason why airlines have struggled to earn a profit. With the recent changes to ticket prices, however, airlines are expected to see a boost to business.
Graphic:
Airline ticket price floor (TBB) and price ceiling (TBA) for air routes according to Ministerial Decree No. 72/2019
Jakarta – Surabaya
TBB: Rp 480,000 (US$33.76)
TBA: Rp 1,372,000.
Denpasar – Jakarta
TBB: Rp 578,000
TBA: Rp 1,651,000.
Jakarta – Padang
TBB: Rp 597,000
TBA: Rp 1,706,000
Jakarta – Makassar
TBB: Rp 750,000
TBA: Rp 2,144,000
Surabaya – Yogyakarta
TBB: Rp 329,000
TBA: Rp 941,000
Source: https://www.thejakartapost.com/news/2019/04/08/new-regulations-set-price-floors-ceilings-for-airline-tickets.html