TEMPO.CO, Jakarta - Transportation Minister Budi Karya Sumadi urged domestic airlines to improve their management as a response to the plan to allow foreign airlines to operate in Indonesia, also known as the open sky policy. Budi Karya asserted that Indonesian airlines must organize their ticket pricing schemes.

"If there is an internal correction, make sub-prices [pricing class]," the Minister said on Wednesday, June 5, 2019.

Pricing class in plane ticket sales is considered important so that the fares can be affordable for all layers of the public. The sub-prices mentioned by Minister Budi Karya is the variation of prices for economy class scheduled commercial transportation.

For example, Budi said that for one route, an airline can employ three prices: a price in accordance to the upper limit tariff, a price 80 percent of the upper limit tariff, and a price 60 percent of the upper limit tariff.

The price management Budi Karya said should be considered to allow domestic airlines to compete with foreign airlines. He said that it is highly possible for foreign airlines to employ similar pricing scheme.

The public discourse regarding open sky policy was previously mentioned by President Joko "Jokowi" Widodo. Jokowi instructed the transportation minister to invite foreign airlines to enter Indonesian market to lower plane ticket prices.

The presence of foreign airlines in Indonesia, Jokowi believed that the aviation industry will become more competitive. "There will be a new balance between demand and supply. Prices can be more competitive," Jokowi said.

However, to achieve the open sky policy, foreign airlines must comply with the cabotage principles. In accordance with Presidential Regulation No, 44 of 2016 on List of Businesses Restricted and Open to Foreign Investment Under Certain Requirements, a foreign airline is allowed to establish its business in Indonesia if 51 percent of its shares is owned by Indonesia.

In addition, the airline must provide pioneer flights to remote areas of Indonesia using propeller aircraft. "So there can be a cross-subsidy if foreign airlines entered Indonesia," Jokowi said.

FRANCISCA CHRISTY ROSANA