Govt stops issuing licenses for new airlines

Govt stops issuing licenses for new airlines

Leony Aurora
The Jakarta Post/Jakarta

The government has decided to stop issuing operating licenses for
new airlines because it says there is already enough competition
in the industry.

Minister of Transportation Hatta Radjasa said on Wednesday
that with the current growth of passengers, the existing 22
airlines and 35 air charter services were more than enough to
cover demand.

"If the growth enables more airlines, we'll see. But for now,
we will stop (issuing licenses). There is no need to add new
airlines," said the minister after a meeting between his
department and the Indonesian National Air Carriers Association
(INACA).

This measure was taken to create a healthy business climate in
the industry, Hatta said. "(The existing airlines) can
consolidate (their businesses), strengthen their capital and
rejuvenate their planes," he said.

The ministry is also in the process of auditing all existing
airlines, including their financial reports, aircraft, and
maintenance procedures.

Such an audit was deemed necessary in light of a crash
involving an aircraft from budget airline Lion Air three weeks
ago. The company's Boeing MD-82 plane flying from Jakarta skidded
off a slippery runway after landing at Adi Sumarmo International
Airport in Surakarta, and 26 people were killed.

Some in the industry have questioned whether the carrier had
cut down on safety procedures and maintenance costs to charge
lower fares.

"All airlines will have to show their cost (calculations) and
prove that they are reasonable," Hatta said.

It is unclear yet when the audit's results will be announced
to the public.

The government has also floated the idea of re-establishing
minimum fares for airlines to ensure standards are met, a move
viewed coolly by the business sector and consumer groups.

Before any decision was made on minimum fares, it would need
to be discussed with INACA, the Business Competition Supervisory
Commission (KPPU), and the Indonesian Consumers Foundation
(YLKI), Hatta said.

"All parties will sit down together and talk about this."

Budget airlines started rapidly growing in Indonesia after the
government scrapped minimum fares for the sector in 2002,
enabling more Indonesians to travel by plane. Many prices offered
were comparable to or even cheaper than other modes of
transportation like passenger ships and trains.

The lowest cut-price fares were about 30 percent of the
current "ceiling fares", which are stipulated by ministerial
decree No. 9/2002.

YLKI chairwoman Indah Suksmaningsih has criticized the plan,
saying that the government should instead focus on establishing
proper regulations instead of re-introducing tariffs.

KPPU member Syamsul Maarif such price limitations were "anti-
competition" and would a step constitute a step back for the
industry.

The KPPU and the transportation ministry are scheduled to
discuss the fare issue next week.