Airfares may not go up if rupiah remains strong

JAKARTA (JP): The Association of Indonesian Airlines (INACA) said on Wednesday it would cancel its plan to raise domestic airfares by 14.5 percent in December if the rupiah continued to strengthen against the U.S. dollar in the coming months.

INACA's Secretary-General Benny Rungkat said a review team consisting of officials from INACA, the Ministry of Communications and the House of Representatives was still studying the planned fare increase.

"But if the rupiah's value reaches at least Rp 7,000 against the U.S dollar, we will not have to raise airfares again. The team is analyzing whether the strengthening rupiah is sustainable."

Benny was quoted by Antara news agency as saying that the evaluation on the tariff adjustment should be made to avoid a further fall in passenger numbers.

INACA, grouping the country's five commercial airlines, on Sept. 1 raised the basic tariff for air travel by 40 percent to Rp 753 per kilometer per seat after the government and the House of Representatives approved the move. The basic tariff was formerly set at Rp 538 per kilometer per seat.

Increases apply only to economy class.

Garuda, Merpati and the three other scheduled airlines currently operating in the country -- Bouraq, Mandala and Dirgantara Air Service -- are scheduled to raise fares by a further 14.5 percent on Dec. 1 to Rp 862 per kilometer per seat.

The current airfares have been set assuming an exchange rate of Rp 10,600 per dollar, a huge increase from the rate of Rp 5,000 which was used when the last round of fare increases was calculated.

The rupiah plunged to a historic low of Rp 17,000 against the greenback early this year, from Rp 2,500 in July before the crisis hit the country. Last week, the rupiah showed signs of recovery, breaking through the 8,000 level from between Rp 10,000 and Rp 11,000 in recent months.

The Indonesian currency continued strengthening on Tuesday to reach Rp 7,600 in late trading. (gis)