Just who will benefit from minimum airline fares?

Just who will benefit from minimum airline fares?

Leony Aurora, The Jakarta Post, Jakarta

There was nothing luxurious about the flight Bonar Siahaan
took from Medan to Jakarta four years ago. Unable to afford a
commercial airline ticket at Rp 1.1 million (US$119.56), he opted
to ride in an Army Hercules plane for one-third of the price.

Passengers sat on two long benches facing each other -- not
unlike the public minivans in Jakarta -- through the seven-hour
flight, with stopovers in several cities. As the plane also
transported goods, "I sat on a box," said Bonar with a small
laugh.

Those days are far behind now. With the blossoming of low-fare
airlines in the country, Bonar can relax on his cushioned seat
for the normal two hours it takes for a flight between the two
cities, albeit without food and beverage services, for between Rp
300,000 and Rp 450,000.

The 38-year-old may have to pay higher prices next year as the
government is mulling over a plan to require a minimum fare for
airlines.

Members of the Business Competition Supervisory Commission
(KPPU) Syamsul Maarif questioned the reasons behind the Ministry
of Transportation's possible plan.

"Is it a concern for safety? Our studies show that there is no
direct correlation between price and safety," he said.

Such a concern emerged particularly after the deadly crash of
an aircraft of the country's leading budget airline, Lion Air, in
Surakarta, Central Java, just a few ago, which took 26 lives.

"If the motive is to protect (airline) operators that are not
willing to give low prices, then the policy sides only with those
operators' interest," Syamsul commented.

Speaking in a similar tone, spokesman for Lion Air Hasyim
Arsal Alhabsi said the plan would challenge people's need.

"Low ticket prices creates high mobilization within the
society and a better distribution (of goods and expertise) within
the vast archipelago," he said.

Bonar uses the cheap fares to avoid the tough competition in
the insurance business in Jakarta, where he lives, in a bid to
expand to his hometown Medan. He travels there twice a month to
sell insurance.

"If prices go down further, I can go every week," he said. New
budget carrier Awair, partly owned by Southeast Asia's leading
budget airline AirAsia, offers a single trip to Medan for as low
as Rp 88,000.

"Airlines have many price categories, and the lowest is
usually for a limited number of seats," said Syamsul. It was
still unclear, he said, what the floor prices would determine --
the lowest price an airline could offer, an average of the
combined prices of all the seats in the plane, or some other
combination.

As reported by the media, the transportation ministry is
considering floor prices at 30 percent of the ceiling fares, as
stipulated by ministerial decree No. 9/2002.

For the Jakarta-Medan route, covering 1,495 kilometers in
distance, the ceiling fare is Rp 1.27 million, and so the floor
price in that case would be Rp 381,300.

Spokesman for flag carrier Garuda Indonesia, known for its
full-service flights with higher ticket prices, Pudjobroto
claimed that floor fares were needed to ensure healthy
competition.

"The airline industry has a clear cost structure of fuel,
maintenance and plane leasing," he said.

Pudjobroto said that instead of not having floor fares, the
government should scrap ceiling fares, as the airline business
was all about services. "Price measures service," he said.

Bonar did not completely agree. "What I want is a safe and
cheap flight. I don't care if I have to stand the whole way, as
long as I get there safely and in good time."