Rising fuel prices pressure airlines
The Jakarta Post, Jakarta
Airline operators are optimistic that passengers will still use their services although some fares will increase due to rising prices of aviation fuel -- avigas and avtur.
"Even if it (the fare increase) discourages some, the number will not be significant," state-owned Merpati Nusantara Airlines corporate secretary Jaka Pujiyono told The Jakarta Post on Wednesday.
Merpati, along with several other domestic carriers, is about to increase fares following an announcement from the Indonesian National Air Carriers Association (INACA) issued on Tuesday.
In the announcement, INACA stated that it would allow airlines to increase their ticket prices by a maximum of Rp 75,000 (US$8.15) per flight hour for each passenger starting on Wednesday. The association argued that the decision was made in an anticipation of a 20 percent increase in the avtur price and a 14 percent hike for avigas.
INACA secretary general Tengku Burhanuddin said in the statement that the decision was necessary to save the domestic aviation industry from collapse.
Merpati estimated that its price hike might reduce its passenger numbers by up to 10 percent, an "insignificant number" according to Jaka. Last year, Merpati flew about 2.8 million people above Indonesian sky.
Jaka added that most airlines had been struggling to keep up with the increasing fuel prices, and so an increase was inevitable.
"The 20 percent avtur price hike came about after comparing March and April rates. Whereas, a year-on-year comparison shows the avtur price has increased by 70 percent. It is just irrational for us," he said.
However, Jaka added that Merpati would not increase its fares to the maximum rate suggested by INACA.
Separately, AdamAir deputy chief operating officer Ronald Wangsanegara told the Post that the airline was optimistic that its fare hike would not reduce the number of its passengers.
"We'll increase our fares, but less than the ceiling price. We are confident that the move will not discourage people from flying with us," he said.
As an illustration, AdamAir is increasing its lowest-priced Jakarta-Surabaya one-way fare from Rp 225,000 to between Rp 250,000 and Rp 275,000. Flying from Jakarta to Surabaya takes about an hour.
By comparison, the executive class Argo Bromo Anggrek train costs Rp 180,000 for about a 12-hour one way trip from Jakarta to Surabaya.
But not all airlines will increase their fares.
PT Lion Airlines, for example, welcomed INACA's decision but at the moment would maintain its current rates, the airlines public relations manager Hasyim Arsal Alhabsi told the Post.
"We have anticipated the global trend of increasing fuel prices over the last year. Therefore, our current pricing policy is in line with the ongoing circumstances," he said.
He admitted though that the fuel price hike would certainly affect Lion Air's profit margin, but "as long as we are not experiencing any (financial) losses, we will maintain our price".
Lion Air's lowest price ticket for the Jakarta-Surabaya flight would remain at Rp 180,000, he said.
According to INACA, at least 5.75 million passenger flew with Lion Air last year.