Airlines offering excessive discounts to face sanctions

JAKARTA (JP): Six domestic airlines have signed a memorandum of understanding here to confirm their May commitment of putting an end to excessive discounting.

"No more excessive discounting will be allowed as of Nov. 1 and violators of the agreement will face severe sanctions," Director General of Air Transportation Zainudin Sikado told reporters after witnessing the signing of the agreement on Friday.

The agreement was signed by the director of Garuda Indonesia, Kussuyono, the president of Merpati Nusantara Airlines, Ridwan Fatarudin, the president of Sempati Air, Hasan Soedjono, the president of Mandala Airlines, Soebagio, the president of Bouraq Indonesia, J.A. Sumendap, and the president of Dirgantara Air Service, Maki Perdanakusuma.

The six airlines, under an agreement signed in May, actually agreed to stop offering the discounts as of July. But they continued offering excessive discounts to travel agencies and passengers.

Under the May agreement, discounts for travel agents should have been limited to a maximum of seven percent. However, domestic airlines are allowed to offer discounts of up to 15 percent to members of professional organizations attending special conferences, 25 percent to students, 35 percent to elderly people and 45 percent to veterans. Return tickets may get a discount of up to five percent and tickets for tour packages 15 percent, while foreign tourists who use Indonesian airlines for their domestic flights and employees of travel agents and airlines can enjoy discounts of up to 50 percent.

The agreement requires airlines to pay a fine of up to Rp 10 million (US$4,666) for each violation of the agreement. The funds collected from fines will go to the Indonesian Air Carriers Association.

"Domestic air carriers should compete with each other and with foreign airlines serving Indonesian destinations by improving services, instead of introducing excessive discounts," Sikado said yesterday.

He said the domestic airlines are also expected by the end of this year to cooperate with each other to introduce endorsable tickets to improve services to passengers.

The introduction of endorsable ticketing will also help eliminate price wars among airlines because their ticketing system will have to be synchronized, he said. (riz)