Government provides 11% PPN DTP incentive for economy class air tickets
The government is providing an incentive in the form of Value Added Tax borne by the government (PPN DTP) at 11% for economy class air ticket prices.
Coordinating Minister for Economic Affairs Airlangga Hartarto, during a press conference in Jakarta on Monday, stated that the policy is intended to safeguard the affordability of air ticket prices amid the increase in aviation fuel (avtur) prices.
The incentive will apply for two months and will be evaluated based on developments in the Middle East conflict.
“With that calculation, the amount of subsidy provided by the government is around Rp1.3 trillion per month. So, if prepared for two months, this amounts to Rp2.6 trillion to ensure that the maximum increase in ticket prices is 9-13%,” said Airlangga.
The government targets keeping the air ticket price increase within the 9-13% range.
In addition to the PPN incentive, the government is also providing import duty facilities of 0% for aircraft spare parts components.
“Aircraft spare parts are given 0% import duty, which is expected to also reduce the operational costs of airlines,” he explained.
The policy is estimated to encourage economic activity by around $700 million per year, increase the contribution to gross domestic product (GDP) by up to $1.49 billion, and create around 1,000 jobs.
Furthermore, the government is also adjusting the upper limit of fuel surcharge or additional fuel costs.
The government has set the upper limit of fuel surcharge at 38% for all types of aircraft, both jet-engine and propeller (propeller).
Previously, the fuel surcharge limit for jet aircraft was 10% and for propeller 25%.
Fuel surcharge is an additional fee charged by airlines to adjust for fluctuations in global fuel prices.
“In setting the fuel surcharge, we have coordinated with all airlines operating in Indonesia, particularly domestic ones, so that we can set the fuel charge increase at 38%,” explained Minister of Transportation Dudy Purwagandhi.