Rising fuel prices pressure airlines

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.