Local airlines delay plan to raise fares<\/p>\n
JAKARTA (JP): Indonesia's airlines have decided to delay their
\nplan to increase domestic fares after the House of
\nRepresentatives raised opposition to the move.<\/p>\n
The decision was taken at a hearing between the Indonesian
\nNational Air Carriers Associations (INACA) and House Commission
\nIV for transportation yesterday.<\/p>\n
\"We agreed to set up a team consisting of legislators and
\nofficials from the communications ministry to study the proposed
\nincreases,\" INACA secretary-general Benny Rungkat said after the
\nhearing.<\/p>\n
The team will decide on the plan at their next hearing on
\nAugust 18, after the House recess.<\/p>\n
INACA groups the country's six airlines -- state-owned Garuda
\nIndonesia and Merpati Nusantara Airlines; and the private Bouraq
\nAirlines, Mandala Airlines, Dirgantara Air Services and Sempati
\nAir.<\/p>\n
The latter stopped operations last month due to financial
\ndifficulties.<\/p>\n
INACA regularly adjusts fares under the approval of the
\ngovernment and the House.<\/p>\n
The communications ministry approved INACA's recent proposal
\nto raise the average domestic fare to 6 U.S. cents per kilometer
\nper seat from the current rate of 3.7 cents from the beginning of
\nnext month.<\/p>\n
The association also proposed to upwardly adjust the exchange
\nrate used to relate domestic airfares to the U.S. dollar to Rp
\n8,000. The current exchange rate of Rp 5,000 was set in January.<\/p>\n
The adjustments would result in an increase of up to 60
\npercent in domestic fares.<\/p>\n
The rupiah has sunk to around Rp 14,000 against the dollar
\nfrom Rp 2,500 in July last year, resulting in low load factors on
\ndomestic flights and inflated operating costs and debt.<\/p>\n
INACA Chairman Soelarto Hadisoemarto told the hearing that
\ncurrent tariffs were no longer valid given the difficulties
\nfacing airlines operators.<\/p>\n
Soelarto said the cost of operating aircraft had risen
\ndrastically and airlines had been left facing huge losses.<\/p>\n
\"We want to raise our tariffs not to increase profits but to
\nreduce losses, we are all in critical conditions,\" Soelarto said.<\/p>\n
Using an exchange rate of RP 5,000 per dollar and with
\nairfares set at 3.7 cents per kilometer per seat, airlines will
\nonly break if the load factor reaches 144 percent, he said.<\/p>\n
\"If the exchange rate is set at Rp 8,000 to the dollar and
\nfares increased to 6 cents per kilometer per seat then we can
\nbreak even with a load factor of 90 percent,\" he added.<\/p>\n
But legislators accused airline companies of \"not managing
\ntheir businesses efficiently\".<\/p>\n
They said the proposed increases would burden many sectors of
\nsociety.<\/p>\n
\"You have not convinced us that the fare increases are
\nnecessary,\" commission member Fahmi Alatas said.<\/p>\n
\"Passengers are not a small group of people and the business
\nsector would also feel the effect of the increases in their
\noperating costs,\" he said.<\/p>\n
Garuda president Robby Djohan said yesterday that 80 percent
\nof aircraft operating costs were dollar denominated and only 20
\npercent could be paid in rupiah.<\/p>\n
Dollar denominated costs apply to engines, spare parts,
\nexpatriate engineers, crew training, insurance, and maintenance,
\nhe said.<\/p>\n
INACA's secretary-general Benny Rungkat said the association
\nplanned an initial increase to 6 cents per kilometer per seat
\nfollowed by a second increase to 9 cents per kilometer per seat
\nin the second half of this year.<\/p>\n
Benny said the fare increases would help companies survive and
\nto repay some of their overseas debt.<\/p>\n
\"If they don't settle their debts, our airline companies will
\nbe grounded,\" he told reporters after the hearing. (das)<\/p>",
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