House approves 100% airfare increase: INACA
House approves 100% airfare increase: INACA
JAKARTA (JP): The House of Representatives has approved a government proposal to increase domestic airfares by 100 percent to compensate for the continued fall of the rupiah against the U.S dollar, the Indonesian National Air Carriers Association (INACA) said yesterday.
INACA secretary-general Benny Rungkat said the House has given approval for a 40 percent increase on Sept. 1, and a second increase of 60 percent in December.
The 40 percent increase alone would not be enough to help airline operators weather the crisis, Benny told Antara news agency.
Benny estimated that the sharp increase in fares would not cause a further fall in passenger numbers because at present only the very wealthy can afford to travel by air.
The Minister of Communications initially gave INACA the green light to raise domestic fares by 110 percent in July but the proposal was overruled by the House.
The House then set up a review team consisting of officials from the national flag carrier Garuda Indonesia, INACA, the Ministry of Communications and the House of Representatives to study the basis of airline cost calculations in detail.
The country's airlines have been severely battered by the monetary crisis which has been gripping Southeast Asia for over a year because they receive their income in rupiah while 80 percent of their operating costs are quoted in dollars.
The country has six commercial airlines -- the state-owned Garuda Indonesia and Merpati Nusantara Airlines, and the private Bouraq Airlines, Mandala Airlines, Dirgantara Air Services and Sempati Air. Sempati was forced to stop operations in June as a result of the crisis.
The government last increased domestic airfares by 37.5 percent on May 7, but observers have since claimed this was insufficient to usher the country's airline operators back into the black.
Benny said the May fares were based on an exchange rate of Rp 5,000 per dollar -- in line with the assumed rate in the state budget -- while the new fares would be based on an assumed exchange rate of Rp 10,000 per dollar.
The exchange rate in the 1998/1999 State Budget has been upwardly revised to Rp 10,600 against the dollar and yesterday the rupiah was trading at over Rp 11,000.
He said INACA would, with government consent, further adjust domestic airfares to bring them into line with the latest exchange rate assumption in the state budget.
Earlier this month, Garuda's president Robby Djohan said that his company was suffering a daily operating loss of at least Rp 3 billion (US$240,000) as a result of artificially low fares and sluggish domestic sales.
Robby said that to offset the huge deficit the national flag carrier would need to increase fares for domestic flights by between 35 percent and 40 percent.
He explained that without such an increase the deficit would continue to widen because more than 80 percent of the airline's expenditure is quoted in U.S. dollars. (gis)