INACA downplays discounts given by new airlines

JAKARTA (JP): The Indonesian National Air Carrier Association (INACA) played down on Wednesday concerns raised by major airlines over big price discounts offered by new airlines.

INACA chairman Wahyu Hidayat said offering price discounts was something normal in the business and the competition is also good for consumers.

However, he acknowledged that the way some new airlines' sales agents push customers to change their tickets with the agents' stuff violated business ethics.

"But, to reprimand those mischievous travel agents or new airlines is difficult because there is no clear-cut regulation to refer to and besides many of the new airlines are not INACA members," he told The Jakarta Post.

Some existing airlines expressed concern over the fact that new airlines not only have given big discounts but also allow their sales agents to aggressively urge customers of other airlines to exchange their tickets for tickets of the new airlines.

"These agents are even ready with a certain amount of cash to be given to customers who are willing to change their tickets," said a senior official of Garuda Indonesia.

The unused tickets are then returned by the agents to their colleagues who sold them, he said.

The Garuda official as well as Wahyu said the big discounts offered by new airlines had not significantly affected their markets now, but it will certainly pose serious threats if it is not eliminated.

Benny Rungkat, the chairman of the association of the air commerce society (Pauki), also criticized the big price discounts offered by the new airlines.

He said that the discounts, which often reached 40 percent of the official rates, would create an unhealthy business climate in the airline industry.

"New airlines are now practicing dumping of their airfares. That's because they have been so hurried and miscalculated the demand of the local market," he said, adding that INACA as the official airline association must reprimand the new airlines.

New airlines, however, have denied the dumping allegations leveled to them.

President of Lion Airlines, Rusdi Kirana, said his company had not slashed its fares.

"Cutting the airfares by 35 percent or 40 percent is really absurd. We don't do that. It will only lead you to financial disaster," he said.

The domestic air fares are determined by INACA but they should gain approval from the government.

Meanwhile, AWAIR said it was only giving discounts during the promotion period, which ends this month.

Indonesia's airline industry has became crowded with the recent entrance of seven airlines, namely AIRWAGON International (AWAIR), Pelita Air Service, Indonesian Airlines Avi Patria, Bayu Indonesia Air, Lion Mentari Air (Lion Airlines), Rusmindo Internusa Air and Jatayu Air.

At least three of them, including Lion Airlines and AWAIR, have began their commercial operations to take advantage of the recovering local market.

INACA recently predicted the country's airline industry would continue recovering with demand for seats estimated to grow by 10 percent this year to reach about 7.5 million passengers from 6.89 million passengers.

It also estimated local demand would continue to grow to reach 8.27 million passengers next year and swell to over 10.4 million passengers by 2004. (cst)