Local airlines may further delay fare increase<\/p>\n
JAKARTA (JP): The Indonesian National Air Carriers Association
\n(INACA) might further delay planned increases in airfares despite
\na slight increase in ticket sales in the first quarter of this
\nyear, the association's senior executive said.<\/p>\n
The chairman of INACA, Soelarto Hadisoemarto, said on Saturday
\nit was not wise to go ahead with the association's planned
\nincrease in airfares when many people were still struggling to
\nsurvive the economic crisis.<\/p>\n
\"It just seems unfavorable (to raise airfares) during this
\ntime of crisis, not to mention the coming general election and
\npresidential election,\" he told The Jakarta Post.<\/p>\n
He also said the stronger rupiah would allow airlines to
\nmaintain current airfares because the rupiah's current exchange
\nrate allowed airlines to cut overhead costs.<\/p>\n
Since early last year, INACA has sought to raise domestic
\nairfares in order to survive the economic crisis, which has
\ncaused a sharp drop in the number of air passengers and tripled
\nairlines' overhead.<\/p>\n
In May 1998, the government allowed local airlines to increase
\ndomestic airfares by 37.5 percent, a figure considered by
\nobservers as insufficient to allow the country's airlines to
\nrecover from the devastating impact of the crisis.<\/p>\n
In August 1998, the House of Representatives approved the
\ngovernment's proposal to allow airlines to further increase
\ndomestic airfares by 100 percent in two stages; a 40 percent
\nincrease in September 1998 and a 60 percent increase in December
\n1998.<\/p>\n
However, INACA delayed the December increase, in part because
\nthe rupiah strengthened to about 7,500 against the U.S. dollar in
\nOctober.<\/p>\n
The rupiah, which hit a low of Rp 17,000 in January last year,
\nfell back to above Rp 8,500 earlier this year before stabilizing
\nat around 8,000 this month<\/p>\n
Soelarto said that even if INACA did increase airfares,
\ncurrently seven U.S. cents per seat per kilometer, the increase
\nwould be gradual.<\/p>\n
\"It is impossible to immediately raise rates to the government
\napproved 11 cents per seat per kilometer. We'll start with eight
\ncents and later move up to nine cents, and so forth,\" he said.<\/p>\n
Soelarto said the sharp depreciation of the rupiah against the
\nU.S. dollar since late-1997 hurt the industry because most of
\ntheir rupiah earnings were eaten up by overhead costs, which, for
\nthe most part, were quoted in U.S. dollars.<\/p>\n
He said some 80 percent of the airlines' overhead, including
\naircraft leasing fees, spare parts and fuel, was quoted in
\ndollars.<\/p>\n
Skyrocketing expenses have forced many airlines to cut costs
\nby canceling contracts to lease aircraft, particularly Boeing
\n747s and 737s and Airbus, from overseas parties, resulting in a
\ndrastic 50 percent drop in the total domestic fleet, he said.<\/p>\n
Several airlines also have been forced to fire employees to
\nsurvive the crisis, he said.<\/p>\n
The economic crisis has cut the purchasing power of
\nIndonesians, resulting in a drastic decline in the number of air
\npassengers, the airlines' largest source of income.<\/p>\n
\"The average load factor fell by more than half to only 30
\npercent in 1998,\" he said.<\/p>\n
Soelarto said the impact of the rupiah's depreciation was more
\nsevere on airlines with scheduled services, including national
\nflag carrier Garuda Indonesia, Bouraq, Mandala, Merpati,
\nDirgantara Air Service and the now-defunct Sempati.<\/p>\n
Sempati halted operations in June last year after shareholders
\ncould no longer afford to keep the airline afloat.<\/p>\n
\"Chartered airline operators are paid in dollars by oil and
\nmining companies, whose fields of activities have not been
\nseverely affected by the crisis,\" he said, adding that 16 of
\nINACA's 22 members were chartered airline operators.<\/p>\n
He predicted domestic airlines would continue to recover this
\nyear, providing the rupiah remained stable.<\/p>\n
\"The current load factor stands at between 60 percent and 65
\npercent, compared to only 30 percent and 40 percent in May last
\nyear,\" he said.<\/p>\n
\"We expect this figure to go up to around 70 percent,\" he
\nadded. (cst)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/local-airlines-may-further-delay-fare-increase-1447893297",
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