Six domestic airlines agree to end competition on prices

JAKARTA (JP): Six domestic airlines have agreed to collude on prices, beginning in July, by signing a memorandum of understanding establishing allowable discount airfare levels for travel agencies and passengers.

Under the agreement signed here Friday, discounts for travel agents will be limited to a maximum of seven percent.

Until now, savvy travelers have been able to find discounts of up to 40 percent off published tariffs for travel agencies, which kept competition alive within the industry.

Minister of Transportation Haryanto Dhanutirto, witnessed the signing of the agreement by president Wage Moelyono of Garuda Indonesia, J.A. Sumendap of Bouraq Indonesia, Soebagio of Mandala Airlines, Ridwan Fatarudin of Merpati Nusantara Airlines, Maki Perdanakusuma of Dirgantara Air Service and Hasan Soedjono of Sempati Air.

The agreement also allows airlines to offer discounts of up to 15 percent to members of professional organizations attending special conferences, 25 percent to students, 35 percent to elderly people and 45 percent to veterans.

Return tickets may get a discount of up to five percent and tickets for tour packages 15 percent, while foreign tourists who use Indonesian airlines for their domestic flights and employees of travel agents and airlines can enjoy discounts of up to 50 percent.

The agreement also requires airlines to pay a fine of up to Rp 10 million (US$4,666) for each violation they make of the agreement.

The funds collecting from fining will go to the Indonesian Air Carriers Association (Inaca).

Hasan commented that the agreement is expected to increase the profitability of domestic airlines by reducing the competition which has led to a price war.

The six air carriers last year made a combined profit of Rp 1.8 trillion (US$837 million).

Inaca's chairman, Soelarto, said he sees problems for the introduction of the agreement because no agency has been assigned to control it.

"Regulation of the monitoring of the agreement's implementation is needed," he said. (yns)