Airlines reluctant to raise ticket prices

Debbie A. Lubis, The Jakarta Post, Jakarta

Although the government has allowed domestic airlines to raise their economy class ticket prices on several routes up to 20 percent, several airlines appear to be reluctant to raise their prices any time soon.

The airlines separately told The Jakarta Post over the weekend they were still busy reviewing their respective pricing policies in line with the government's new regulations.

Some of them did acknowledge that they were ready to cut their ticket prices to attract customers.

"If competition in the domestic airline industry is not so tight, it is possible to increase the prices. But if the competition gets tougher, we will cut our prices," marketing manager for state-owned Merpati Airlines Yoyok Priyowiwoho said.

Pelita Airlines indicated it would probably cut its ticket prices, citing the tight competition among the country's airlines.

"Maybe we will lower our airfares because there are some that already dropped their prices. But we should be realistic, we do not want to be unable to finance our maintenance," Dahlan Hasjim, Pelita's marketing manager, said.

StarAir said it would not raise its prices until after April.

"As an operator, of course we want to raise the airfares but we would not do so until there is a growth in the market. Perhaps in April, when there is a growth in passengers, we shall raise our prices," Emizola Maas, StarAir's scheduling and product planning manager said.

Director general of air transportation at the Ministry of Transportation Soenaryo Y announced last Thursday two new ministerial decrees for a new pricing policy for the country's airline industry.

Under the decrees, the government will raise the maximum airline ticket prices up to 20 percent on certain routes and set no minimum prices.

Previously, the ticket price set by the Indonesia National Air Carriers Association (INACA) ranged between the minimum price and maximum price. In the past, airlines were not allowed to cut their prices below the minimum price set by INACA. Under the new regulation, they are free to do so.

State-owned airline Garuda Indonesia, which is the country's largest airline, noted however that pricing, despite being important in competition, was not the only factor in attracting customers.

"Cutting airfares is our last alternative ... We'll try to be consistent with our policy in prioritizing services because we want to be a leader not a follower," Garuda's executive vice president for commercial affairs Bachrul Hakim said.

Bouraq Airlines also said it would not cut prices to attract customers.

"A price war will kill the airlines. This may sound like a cliche, but we will improve our services. We have our own market already but we have to be alert to observe market progress," Bouraq business development manager Eko Soerijono said.

Star Air and Merpati also agreed that airlines should not compete in price only but in service quality like punctuality, safety and food and beverage.