Govt asked to strip Inaca of price-setting authority

Govt asked to strip Inaca of price-setting authority

JAKARTA (JP): The country's antimonopoly watchdog will ask the
government to revoke the ministerial decree that grants the
Indonesian National Air Carriers Association (Inaca) the right to
determine ticket prices for domestic airlines.

Business Competition Supervisory Commission (KPPU) chairman M.
Iqbal said on Friday that the commission considered the decree,
which was issued in 1997, contradicted the 1999 Antimonopoly Law.

The decree should have been nullified, following the issuance
of the Antimonopoly Law, he said.

"But, in reality, that did not happen. Therefore, we shall ask
the Ministry of Communications to do so (nullify the ministerial
decree)," he said on the sidelines of a hearing between the
commission and representatives of the ministry, Inaca, and
several airline operators here.

The commission had earlier found indications that Inaca had
violated the antimonopoly law by fixing domestic airline ticket
prices and operating as a cartel, Iqbal said, adding that for
that reason the association was being summoned.

However, during the hearing, Inaca's chairman Wahyu Hidayat
defended the association's actions, citing it had been granted
the right to determine ticket prices by the government.

"We are only doing what the government expects us to do, all
responsibility should fall on the government," he said.

Wahyu stressed that the association did not fix air ticket
prices but only set the ceiling and floor exchange rates for the
pricing standard set by the government, currently at 11 U.S.
cents per passenger per kilometer.

"This is to ensure that competition among our members is
carried out in a rational way according to their own abilities,
rather than in a way that kills off the industry," he stressed.

Early last month Inaca increased the standard exchange rate
for domestic airline tickets to between Rp 5,000 and Rp 9,000 to
the U.S. dollar, from between Rp 4,000 and Rp 7,500 previously,
due to the weakening of the rupiah against the U.S. dollar.

Kamandanu, an executive of PT Mandala Airlines, said that the
exchange rate was set to prevent airlines indulging in unhealthy
competition by lowering their prices to levels below their
operational requirements, in order to attract customers.

"(The exchange rate range), gives plenty of choices for
customers, but not at the cost of the airline's operations," he
said.

KPPU's vice chairman Pande Radja Silalahi, however, said that
the act of setting limits to the floor and ceiling exchange rates
of airline tickets amounted to fixing prices, and, as such, was
against the antimonopoly law.

Iqbal said that Inaca should have been charged with violating
the antimonopoly law and therefore been subject to certain
penalties, including a maximum fine of Rp 25 billion (about
US$2.2 million), for its actions.

"But since it was acting on behalf of the government, we will
send a letter to the government urging it to revoke the decree,"
he said. (tnt)