Indonesia Ministry of Tourism Concerned about High Domestic Fares

Indonesia, air transport, air fares, competition

Jakarta Soekarno Hatta airport

While international fares remain relatively low out of Indonesia due to hectic competition, domestic fares continue to rise, creating concern among officials as Indonesian travellers favour international destinations over inland destinations. 

Competition seems not to work anymore for domestic air routes in Indonesia and this generates anger from consumers as well as worries for authorities. In January already, consumers started to complaint about skyrocketing prices on domestic routes with some of the cheapest fares costing almost twice as much as a year before.

Travellers’ anger translated then into a reduction in air fares as promised by the Indonesian National Air Carriers Association (INACA). The association then promised to lower air fares by 20 to 60%. In return, the Transportation Ministry supported national air carriers by lowering the price of airport services and navigation.

Three months later, it seems however that INACA only paid lips service to the request of both the government and consumers. The Transportation Ministry then issued on March 29 new regulations on airfare to regulate airline ticket prices for economy class services.

According to the new regulation, the price floor for tickets (TBB) is set at 35 percent of the price ceiling for tickets (TBA). Airlines can determine their own prices as long as they set them within the regulated limits.

Is it however enough? Last week, tourism minister Arief Yahya has called on Transportation Minister Budki Karya Sumadi to issue another regulation that would require airlines to lower their prices for economic-class tickets to help boost the tourism industry.

“We hope that the transportation minister will issue a regulation to push airfares down and take effect this week,” Yahya said on Wednesday. The Minister is concerned about the drop of domestic tourism, particularly to island destinations as travellers favour instead international destinations, deemed cheaper. The Ministry would like to see only 20% of the seat capacity being sold at full fares and another 20% at intermediary fares.

According to the Indonesia Tour and Travel Agency Association (ASITA), despite the two regulations issued in January and March, many airlines have failed to reduce significantly fares.

ASITA chairman Andika Lim told to Indonesian media that, “Indonesians prefer to travel abroad through Singapore and Malaysia because of high ticket prices . It is counterproductive to the efforts of the Tourism Ministry to boost the country’s tourism.” Another issue for passengers flying low cost airlines is now the obligation to pay for luggage, a measure introduced by the country’s largest domestic carrier, Lion Air…