Indonesia Aims to Slash Airfares!

Despite record numbers, Indonesian officials continue to seek ways to attract even more tourists to the country. They believe that reducing airfare costs will give Indonesia a competitive edge. A special task force will be created to find ways to help lower these costs.

The task force's goal is not only to curb rising airplane ticket prices but also to establish an efficient aviation industry in the country, stated the Minister of Tourism and Creative Economy, Sandiaga Uno. "We have already developed a plan with nine measures, one of which is the creation of a task force to reduce airfare prices. Additionally, we will study all aspects to optimize the aviation industry and ultimately enhance the country's attractiveness to tourists worldwide," he said.

The task force will include representatives from the Ministry of Economic Affairs and the Ministry of Maritime Affairs and Investment. Uno noted that rising fuel prices are not the sole factor driving up ticket prices. Taxes and operating expenses also play a significant role in flight costs, he added.

The Coordinating Minister for Maritime Affairs and Investment, Luhut Binsar Pandjaitan, previously discussed measures he believes will help airlines lower ticket prices. He emphasized focusing on the cost calculations of block hours, which are the primary indicators of carriers' expenses for aircraft maintenance. "We are developing a strategy to reduce maintenance costs based on the types of aircraft and services," he said. Luhut expressed confidence that adjusting the fare calculation mechanism to account for airlines' operational costs per flight hour would lead to noticeable price reductions.

The Indonesian government plans to accelerate the elimination or reduction of customs duties and ease restrictions on importing certain goods necessary for flights. Luhut noted that 16% of aircraft operating costs are for spare parts, the second-largest expense after fuel. He also mentioned how ticket prices are calculated based on route characteristics, sometimes leading to double sales taxes, mandatory insurance fees, and double passenger service charges for transit flights.

When determining airfare prices, it is also necessary to consider the revenue airlines earn from cargo transportation. Revenue from cargo should be factored into the setting of maximum airfare rates. The government could also consider revised VAT rates for specific priority destinations to stimulate increased travel. The Committee on Price Control of National Air Carriers will monitor the outcomes of these measures monthly, Luhut added.

Compared to ASEAN countries and nations with large populations, Indonesia's airfare costs are the second highest after Brazil. The most effective way to address this is by tackling the cost of aviation fuel, which is uncompetitive in Indonesia. Officials apparently plan to meet with representatives from Pertamina, the monopolist in the country's aviation fuel market.

Dwi Marhen Yono, Director of Marketing at the Ministry of Tourism and Creative Economy, stated: "The rise in domestic airfare affects both local and foreign tourists. Higher prices for domestic flights not only deter international tourists from exploring other regions of Indonesia but also make it difficult for passengers from remote areas to travel to the country if they cannot fly directly from their city of departure to Bali. For many, Jakarta would be a convenient transfer point, but with rising domestic flight prices, it is often more economical to transfer in hubs in other countries such as Kuala Lumpur, Bangkok, or Singapore."

Regardless, the officials' figures are encouraging, at least for Bali. Despite the rising cost of flights in Indonesia, Gusti Ngurah Rai International Airport has confirmed that six major international airlines are applying to increase their flights starting in October 2024. Handy Heryuditiavan, the CEO of Bali's main airport, stated, "We are open to any airline that wants to fly here; please, we are only too happy. The main thing is that the time slot is still available and our facilities can accommodate the type of aircraft being used."

Sources: ANTARA, BaliDiscovery