Domestic airfares set to increase<\/p>\n
Rendi A. Witular, The Jakarta Post, Jakarta<\/p>\n
Air travelers may have to dig deeper into their pockets starting
\nnext week as the government plans to raise the reference price
\nfor domestic destinations, in a move it claims will help prevent
\nunhealthy competition in the country's overcrowded air industry.<\/p>\n
The reference price, the average minimum price a carrier is
\nallowed to charge a passenger per hour, will be increased by some
\n10 percent, from Rp 265,000 (about US$28) to at least Rp 285,000,
\nMinister of Transportation Hatta Radjasa said on Thursday.<\/p>\n
The price is calculated based on the minimal costs that an
\nairline spends on its operations, including the cost of fuel,
\nmaintenance, aircraft leasing, crew salaries and other
\nadministrative costs.<\/p>\n
Analysts said, however, that it remained unclear whether the
\nreference price rise would translate directly into a 10 percent
\nincrease in average retail ticket prices, especially after state
\noil and gas company PT Pertamina lowered air fuel prices for
\nJune.<\/p>\n
\"Aside for compensating for the rise in fuel prices, the plan
\nis also aimed at preventing unfair competition in the industry.
\nThere are some airlines willing to 'dump' their fares to get more
\npassengers,\" Hatta said in a ceremony on Thursday.<\/p>\n
The practice of lowering ticket fares, Hatta said, could
\ntrigger a price war between airlines that would eventually
\nbankrupt some of them, as fares would no longer cover operational
\ncosts.<\/p>\n
Some members of the Indonesian National Air Carriers
\nAssociation (INACA) have proposed the ministry allow them to
\nimpose fuel surcharges on their passengers to compensate for the
\nrising fuel costs.<\/p>\n
Should the fuel costs decline, the surcharge rate would be
\nreduced or scraped, they said.<\/p>\n
However, Hatta rejected the surcharge proposal after other
\nmembers of the association opposed the idea for fear of losing
\npassengers.<\/p>\n
Hatta said the reference price policy had been discussed with
\nthe INACA, with the majority of its members agreeing to it.<\/p>\n
Hatta predicted there would be two airlines likely to close
\ntheir operations in the near future, aside from the recent
\nclosure of budget carrier Star Air. There were another four or
\nfive airlines that were currently in financial difficulties, he
\nsaid.<\/p>\n
\"There will be more domestic airline closures. This is not
\nmerely because of rising fuel costs, but more a complication of
\nseveral problems,\" said Hatta, refusing to name the troubled
\nairlines.<\/p>\n
In the future, the Ministry of Transportation would not issue
\nany new licenses to new airline operators in order to revitalize
\nthe industry, which was already overcrowded with 28 airlines,
\nHatta said.<\/p>\n
Pertamina recently announced it had lowered the price of fuel
\nfor the airline industry as of June 1 by an average of 7 percent
\nfrom the previous month's prices.<\/p>\n
While the move would relieve some pressure on the industry,
\nPertamina said airlined will have to pay in cash on the spot to
\nfill their tanks at the country's 15 main airports.<\/p>\n
Pertamina adjusts prices for air fuel every month.<\/p>", "url": "https:\/\/jawawa.id\/newsitem\/domestic-airfares-set-to-increase-1447893297", "image": "" }, "sponsor": "Okusi Associates", "sponsor_url": "https:\/\/okusiassociates.com" }