MTI provides policy recommendations to boost Indonesia's aviation industry

The Indonesian Transport Society (MTI) has conveyed several policy recommendations to safeguard the sustainability of the national aviation industry amid global geopolitical turbulence. According to MTI General Chairman Haris Muhammadun, the government-borne Value Added Tax (PPN DTP) incentive for plane tickets can only mitigate price increases in the short term. “It is effective only in the short term, but limited. For example, it is currently low season. During high season, when demand is high, market mechanisms operate, aviation fuel prices remain high, while tariffs like the current ones will increasingly burden airlines,” Haris told ANTARA in Jakarta on Wednesday. He views the PPN DTP policy as more of a ‘symptom dampener’ rather than a solution to strengthen the aviation industry’s foundation. Therefore, to address surges in energy prices and supply chain disruptions, structural and systemic policies are needed. MTI’s recommendations include reforming aviation fuel pricing and supply, providing fiscal incentives for airlines such as temporary corporate income tax (PPh) reductions, aircraft leasing incentives (tax relief), and relaxation of import duties on spare parts to maintain cash flow and solvency. In addition, efficiency in navigation and airport services is considered crucial. This can be achieved through route optimisation (airspace design), reducing holding or delays, implementing Performance Based Navigation (PBN), and lowering airport service fees such as ground handling, parking, and landing fees. MTI also encourages strengthening the domestic maintenance, repair, and overhaul (MRO) industry. On the other hand, public perception of flight fares needs to be maintained to preserve trust in air transport. Support for downstream sectors such as tourism and hospitality is also part of the strategy to maintain the industry ecosystem. Furthermore, MTI supports the utilisation of domestically produced aircraft, such as those made by PT Dirgantara Indonesia, to reduce subsidy costs and ticket prices. In the medium to long term, the tariff regulations based on Minister of Transportation Decree Number KM 106 of 2019 on the Upper Limit Tariff (TBA) for Economy Class Passenger Services in Scheduled Domestic Commercial Air Transport are deemed in need of review because their parameters are no longer relevant. Regarding the effectiveness of PPN DTP, Haris explained that the incentive can indeed help maintain airline performance in the short term. However, further adjustments are needed to ensure a balance between operational costs and revenue. As is known, the domestic aviation fuel price increase of more than 70 per cent effective 1 April 2026 is estimated to trigger a 9-13 per cent ticket price hike. The government responded with a 38 per cent fuel surcharge policy and 11 per cent PPN DTP to maintain affordability and sustain passenger load factors. Haris added that the PPN DTP policy, which applies for about 60 days, is temporary and is expected to dampen the impact of the aviation fuel price surge. However, if global uncertainty persists, the pressure on the aviation industry will intensify, both for airlines and consumers. “There is an impact, and it can even feel quite real, but it won’t last long and won’t change the industry’s foundation. This is short-term market stabilisation (short-term demand stimulus); 60 days is too short to change long-term travel behaviour or airline pricing strategies,” he explained.