PT KAI urges govt to limit airline price war
Yuli Tri Suwarni The Jakarta Post Bandung, West Java
State railway company PT Kereta Api Indonesia (PT KAI) has strongly urged the government to limit the ongoing price war between domestic airlines, which has had a domino effect on the company.
PT KAI spokesman Patria Supriyoso said here on Friday that if the government established a minimum price for all domestic destinations instead of leaving it to the market, PT KAI would be able to recover from the difficult conditions faced by executive train services in Java.
"Ticket prices have been a decisive factor for travelers when determining their choice," he said, when awarding prizes to senior high school students who had won a contest related to the railways, in a ceremony here on Friday.
Patria argued that the price war between airlines for domestic destinations could no longer be tolerated, as prices had dropped so much, thereby affecting PT KAI's income.
He said that prices had fallen drastically by around 30 percent last year, and again by almost 50 percent earlier this year.
For example, the price of a one-way ticket for the Jakarta to Yogyakarta route had dropped to Rp 470,000 in the second half of 2002, from more than Rp 600,000 in the first, while it fell drastically again to Rp 225,000 earlier this year.
"Obviously, travelers will prefer to fly, as PT KAI charges Rp 250,000 per person for the same journey," he said.
The price war broke out following the start of new airlines operating beside established ones over the last three years.
The air ticket price war has also affected sea and land transportation. The mushrooming of airlines serving the Jakarta to Medan route has caused state-owned airlines Garuda and Merpati to cut their price to Rp 550,000 at present, from Rp 850,000 in March and Rp 1.2 million last year. New airlines, such as Jatayu Air, Batavia Air and Lion Air, charge Rp 380,000 for the same journey.
Many travelers to and from Medan have flown on the new airlines, as state-owned ship operator PT Pelni has set a price of Rp 280,000 for economy class and bus operators charge Rp 310,000 for economy class.
Patria said the decline in the number of passengers on executive trains had reached 50 percent on the Jakarta to Surabaya route.
"The company's income from noneconomy-class trains, which had been a source of financial support for economy-class trains, has also dropped by 80 percent," he said. It was therefore impossible for noneconomy-class trains to generate a cross-subsidy for economy-class trains amid the price war.
Economy-class trains run at a loss, in order to ensure that a service for low-income people is maintained, as required by the government.
"Due to the price war, PT KAI has suffered a loss of potential income of Rp 7 billion per month. Over the last four months, PT KAI has suffered a total loss of potential income of Rp 28 billion," he said.
He added PT KAI had also started an efficiency drive, to keep operational costs as low as possible, and had reduced service frequencies on less well-used routes.