INACA raises airfares by 37% after fuel hike

JAKARTA (JP): The government has approved an Indonesian National Air Carriers Association (INACA) proposal for a 37 percent increase in airfares, following the steep hike in fuel prices.

The association's chairman, Soelarto Hadisoemarto, said yesterday the increase would come into effect tomorrow and would be applied to economy class domestic flights only.

Soelarto did not elaborate on the specific rate increases.

The government announced Monday that fuel prices would increase by between 25 percent and 71.43 percent as of yesterday to reduce subsidies and curb the state budget deficit.

Jet fuel was raised to Rp 600 from Rp 420 per liter, further burdening ailing national carriers.

Fares for land and sea transportation also rose following the fuel price rise.

Soelarto said the airfare increases were in line with a regular six-monthly tariff adjustment conducted by the association in line with the rupiah's fluctuation against the dollar.

"The increase is not just to follow the fuel price hike but also to adjust to the current exchange rates," Soelarto told The Jakarta Post.

INACA increased airfares in December to adjust to the sharp appreciation of the U.S. dollar against the rupiah.

The rupiah has dropped to 8,000 against the dollar from 2,500 last July.

Last year, the association postponed its adjustment until October from the supposedly May, and increased the fares by between 8 percent and 10 percent to adjust to the weakening rupiah at the time.

The association increased the average fare to Rp 315.19 from Rp 286.54 per kilometer for each passenger last December.

Local airlines are facing financial difficulties with rising costs and an inability to service payments on their aircraft, both of which are denominated in dollars. (das)