Garuda may halt tariff hike plan

JAKARTA (JP): National flagship carrier Garuda Indonesia said Monday it would maintain its airfares for domestic routes at the current level if the rupiah's value continues to strengthen against the U.S. dollar.

The airline's president, Robby Djohan, said Garuda would not have to raise the domestic flight rates in December as planned earlier this year, if the rupiah continued to stay at the current level of between Rp 7,000 and Rp 8,000 to the U.S. greenback.

"We don't need another rise in December, because at the current tariffs, we are not profiting much nor are we losing too much," Robby told reporters after the signing of an agreement by the Sahid International Hotel Management and Consultant with the hotel's new partner Saudi Arabia's Badr Trading & Contracting Est.

The current domestic airfares of all the five operating scheduled airlines in the country have been set assuming an exchange rate of Rp 10,000 per dollar, a huge increase from the rate of Rp 5,000 which was used when the last round of fare increases was calculated.

The Association of Indonesian Airlines (INACA), which groups the five commercial airlines, has planned to raise the fares by 14.5 percent on Dec. 1 to Rp 862 per kilometer per seat from Rp 753 per kilometer per seat set last September.

The rupiah strengthened to around Rp 7,000 last week, after falling to a historic low of over Rp 17,000 earlier this year from around Rp 2,500 in August 1997.

On Monday the rupiah closed at Rp 7,400 per U.S. dollar after reaching an intraday low of 8,000 in the morning.

Robby said Garuda might even lower its domestic airfares if the rupiah continued to strengthen to between Rp 6,000 and Rp 7,000 to the U.S. dollar.

"If the (rupiah's) exchange rate strengthens again, we will adjust it. We may reduce the rates, because our tariffs depend much on our operating costs, which are mostly in U.S. dollars," he said.

Robby stressed the importance of having a stable exchange rate in order to help the airline industry with a business indicator.

"The most important thing is not to have a high or low exchange rate, but for it to be more stable because it is important to have a stable indicator," he said. (das)