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)