Aviation expert deems government needs to overhaul upper limit aircraft fares
Jakarta (ANTARA) - Aviation expert Alvin Lie believes the government needs to update the upper limit tariff (TBA) for aircraft ticket prices to make it more realistic, adaptive to global dynamics, and capable of balancing the industry with public purchasing power.
“I encourage the government to overhaul this upper limit tariff, which has been in place for seven years, by updating it with more current assumptions, including the rupiah exchange rate. It should also use assumptions for aviation fuel prices that may apply,” said Alvin when contacted by ANTARA in Jakarta on Friday.
The Chairman of the Indonesian Air Transport Service Users Association (APJAPI) assesses that the current TBA is no longer appropriate because it is nearly seven years old and various assumptions within it have deviated significantly from current conditions.
The TBA is based on Ministerial Decree Number KM 106 of 2019 on the Upper Limit Tariff for Economy Class Passenger Services in Scheduled Commercial Air Transport Domestic.
Furthermore, the rupiah exchange rate is considered to have changed significantly compared to when the policy was made, as has the aviation fuel price standard, which is no longer relevant to current conditions.
In addition, the cost calculation method in the TBA still uses a distance-only approach, without considering other factors that more accurately reflect operational conditions.
He suggests using more realistic aviation fuel price assumptions, for example, referring to the situation in February before the Iran crisis, to get closer to normal conditions. Besides that, tariff calculations should not only be based on distance but also take flight duration into account as an important variable.
According to him, if this approach is applied, it could potentially lower fares for long-distance routes, while short-distance routes might see an increase.
To address the highly dynamic oil price fluctuations, he believes the implementation of a fuel surcharge could be considered as an additional mechanism.
However, he emphasises that the fuel surcharge should no longer differentiate between jet and propeller (propeller) aircraft because the difference is already reflected in the TBA. The difference that has occurred so far is deemed unreasonable because the aviation fuel price used for both types of aircraft is actually the same.
He highlights that the volume of aviation fuel consumption is essentially unchanged, making the difference in fuel surcharge amounts irrational.
To date, the fuel surcharge for propeller aircraft can reach 25 percent, while for jet aircraft it is only around 10 percent, which is considered unfair. This difference is seen as discriminatory and burdensome to passengers on propeller aircraft, especially in eastern Indonesia.
Therefore, he stresses the importance of overhauling the TBA first before discussing a more dynamic fuel surcharge mechanism.
The fuel surcharge can be made flexible and adjusted to conditions, even possibly changing every month following energy price developments.
Meanwhile, he assesses that the current geopolitical situation is a global issue that not only affects Indonesia but the entire world. The impact is not only felt in the aviation sector but also in shipping, land transportation, and various other industrial sectors.
On the other hand, the weakening of the rupiah exchange rate exacerbates the situation because it drives up production costs broadly.
This condition has the potential to trigger a general increase in goods prices, not due to increased demand, but due to rising production costs amid declining purchasing power.
He also warns of the risk of economic slowdown or even recession if this situation continues without appropriate policy adjustments.
Previously, the Indonesian National Air Carriers Association (INACA) requested an increase in fuel surcharge and domestic flight TBA due to global geopolitical conflicts.
INACA Secretary General Bayu Sutanto said this considers the current aviation industry conditions, namely the influence of geopolitical conflicts between the United States (US) and Israel vs Iran, which have made international economic conditions unconducive.
“That condition has resulted in a rise in world oil prices and the weakening of the rupiah against the US dollar, where both cost components significantly affect the increase in operational costs of national airlines,” said Bayu in a statement in Jakarta on Wednesday (25/3).