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)