Local airlines hit by fuel hike: INACA

Local airlines hit by fuel hike: INACA

JAKARTA (JP): The recent move of state oil and gas company
Pertamina to raise the price of aviation fuel will further damage
the country's ailing airline industry, according to the
Indonesian Association of National Air Carriers (INACA).

INACA's chairman, Soelarto Hadisoemarto, said the price hike
was another blow to the country's airline operators, most of
which have suffered financial problems due to the economic
crisis.

Since Aug. 1, Pertamina has increased the price of fuel by
11.5 percent for international flights and 14.5 percent for
domestic flights.

The fuel price per liter for domestic flights, which is set in
the local currency, was increased from Rp 1,060 (14 U.S. cents)
to Rp 1,210, Soelarto said.

The fuel price per liter for international flights was
increased to 17.82 cents from 15.97 cents, he added.

Soelarto said the higher price would certainly make it more
difficult for airline operators to survive the crisis, which had
caused a drastic drop in passengers.

He said the sharp depreciation of the rupiah against the U.S.
dollar since late 1997 was also still hurting the industry,
because most of their rupiah earnings were eaten up by overhead
costs, which are usually quoted in U.S. dollars.

Around 80 percent of the airlines' overheads, including
aircraft leasing fees, spare parts and fuel, is quoted in
dollars, he said.

Soelarto said skyrocketing expenses have forced many airlines
to cut costs by canceling contracts to lease aircraft,
particularly Boeing 747s and 737s and Airbus, from overseas
parties, resulting in severely shrunken domestic fleet.

He said the impact of the rupiah's depreciation was more
severe on airlines with scheduled services, including national
flag carrier Garuda Indonesia, Bouraq, Mandala, Merpati,
Dirgantara Air Service and the now-defunct Sempati.

Sempati halted operations in June last year after shareholders
could no longer afford to keep the airline afloat.

Soelarto said it was not fair that Pertamina could freely
increase the aviation fuel price without informing airline
customers, while airline operators are always urged not to raise
airfares.

"We are even told by the House of Representatives to reduce
the airfares just because the rupiah has started to bounce back.
But we disagreed with that because we ourselves have been
patiently delaying our airfare hike plans for months," he said.

He said the House of Representatives approved in August last
year the government's proposal to allow domestic airfares to
increase by 100 percent in two stages; a 40 percent increase in
September 1998 and a 60 percent increase in December 1998.

INACA, however, delayed the December increase, in part due to
the strengthening of the rupiah to 7,500 against the U.S. dollar
in October.

Soelarto further questioned Pertamina's failure to inform
airline operators prior to the price hike schedule.

Pertamina spokesman Ramli Djaafar said the company did not
announce the price hike of the aviation fuel because the fuel was
no longer subsidized by the government.

"Price changes for airplane fuel can now be made official
simply through an internal decree by Pertamina's president. But
the prices for fuels for automotive and other purposes, which are
still subsidized, can only be changed by the government, and must
be announced publicly by the government," he said. (cst)