Local airlines may soon raise domestic fares

Local airlines may soon raise domestic fares

JAKARTA (JP): The price of domestic airline tickets may soon
increase following the Indonesian National Air Carriers
Association (INACA)'s recent decision to raise the exchange rate
of their U.S. dollar-based fares.

INACA chairman Wahyu Hidayat said on Tuesday that the
association had decided to increase the exchange rate band to
between Rp 5,000 and Rp 9,000 per U.S. dollar, from the previous
range of Rp 4,000 to Rp 7,500.

The adjustment of the exchange rate has been made to reflect
the actual value of the rupiah against the dollar which has
fallen dramatically in recent months.

"Every time the rupiah weakens, we domestic airlines tremble
(with fear)," Wahyu said, explaining that even though earnings
were received in rupiah, almost 80 percent of the local carriers'
operational costs were paid in U.S. dollars.

The local unit has been hovering between Rp 10,000 and Rp
11,000 against the U.S. dollar in recent months due to
uncertainties in the domestic political situation.

The rupiah ended higher on Tuesday at Rp 11,060 compared to Rp
11,600 on Monday.

The passenger price per kilometer has not changed from 11 U.S.
cents a passenger per kilometer despite the exchange rate band
adjustment.

The standard exchange rate for airline tickets is determined
by INACA, while the passenger price per kilometer is set by the
government, Wahyu told reporters after signing an agreement with
Lippo Bank.

The agreement provides the bank's credit card holders easier
access to Merpati tickets and admittance to the airport lounge.

Wahyu said implementation of the price hike would be at the
discretion of each airline, adding that if the airlines still
believed their existing price range was adequate then it may not
decide to make any adjustments.

"They may retain their fare as long as it is within the price
range that has been decided by INACA," he added.

Wahyu, who is also the president of state-owned domestic
airline company PT Merpati Nusantara, said the airline will adopt
the new price range on June 1.

"By then we also hope that all INACA members will be able to
adopt the new exchange band so that measures, such as sanctions
for airlines selling below or above the price range, can be
imposed," he said.

In the meantime, Merpati's earnings this year may not reach
the Rp 1.4 trillion (about $126.6 million) targeted at the
beginning of the year, Wahyu said.

"The 1.4 trillion target assumed that the four aircraft we
ordered for this year were all operational," he said, adding that
so far only two Boeing 737-200 aircraft leased by the company had
arrived, while two more were not expected until early June. Wahyu
said that he had expected the aircraft to arrive in early
January.

"Now I don't think we can achieve higher than 1.1 trillion,"
he said, noting that Rp 1.1 trillion had been the total revenue
received last year. (tnt)