Saturday, 14 December 2019

Air Carriers Reluctant to Drop Airfare despite Tariff Revised

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Editor:

Laila Afifa

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  • Flight ticket illustration (pixabay.com)

    Flight ticket illustration (pixabay.com)

    TEMPO.CO, Jakarta - Transportation Ministry determined to lower the upper limit tariff (TBA) of airlines ticket in a bid to suppress the trend on the rocketing airfare. Air carriers responded to the plan differently.

    Lion Air Group has yet ensured to drop airlines ticket price. The Managing Director, Daniel Putut Kuncoro, said that his side is still calculating the impact on the plan. “We will assess the impact,” said Daniel.

    Not only lowering the TBA, Daniel added, the government was also urged to reduce the tariff of operational support services. He hoped a firm strategy could be taken, such as a decrease in support services fares besides incentive provision. This could help airlines to suppress the operational cost.

    “All supporting airlines cost should be lowered as well, such as tariffs for air and air navigation services and fuel tax removal. The government should also lower the US dollar exchange rate,” said Daniel on Tuesday, May 14. Those tariffs are components in the price structure that form flight operational cost.

    Garuda Indonesia shared the same statement. The Corporate Financial Director, Fuad Rizal, said that his management must adjust the price formulation to the new airfare top limit. “It’s not complicated. We just need to follow it in our formulation system,” said Fuad on Monday, May 13.

    Fuad stopped short of detailing how much the price would change following the new regulation, especially for ticket sales near the Eid homecoming or mudik lebaran this year. Besides, the government has yet announced the new list of TBA.

    At present, the top limit of airlines tariff is still regulated in the Transportation Ministerial Decree No. 72 of 2019. “If it’s been decided, we will follow it regardless of the model.”

    Meanwhile, Sriwijaya Air Group planned to reduce its flight frequency or routes should it faces loss following the drop in the top limit of airfares by 12-16 percent. The Group President Director Joseph Andrian Saul said that other strategies to boost the ancillary revenue had been implemented even before the fare reduction.

    “We’ll see the situation first, [because] it will surely affect the financial performance. If then we lose, we will, of course, take significant actions,” Joseph told Bisnis on Tuesday, May 14.

    He added that the measures include the closing of routes with low demand. However, that would be the last option to take if necessary.

    Joseph hoped the loss would not disturb the welfare of his employees and his company could maintain the number of workers.

    According to the Indonesian Consumer`s Foundation (YLKI), the lowered airfare price ceiling would not automatically reduce the airlines tariff as in fact, all air carriers had set their price over 100 percent of the price floor (TBB) on average.

    “So the drop in TBA will not press the soaring airlines ticket price and will not return the phenomena of cheap flight tickets,” said the YLKI chairman Tulus Abadi in a written statement Tempo received on Tuesday, May 14.

    Tulus explained that the drop in airfare upper limit would indeed prevent air carriers from increasing its tariff up to 100 percent as previously, yet it would trigger airlines to pull up the rest percentage of the TBA, meaning that flight ticket tariff has the potential to rise.

    YLKI, he added, feared the TBA reduction would draw negative feedback from air carriers by closing or reducing the frequency of unprofitable flight routes. Thus, it would threaten public access to flight services such as in East Indonesia or remote areas.

    DEWI RINA CAHYANI