Airlines reluctant to raise ticket prices

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.