INACA Responds to Concerns About High Flight Ticket Prices

TEMPO.CO, Jakarta - Bayu Sutanto, Chairman of the Scheduled Aviation Division of the Indonesian National Air Carriers Association (INACA), addressed recent comments by Coordinating Minister for Maritime Affairs and Investment Luhut Binsar Pandjaitan regarding high flight ticket prices. Luhut recently said that people have complained about pricey airline tickets.

Minister of Tourism and Creative Economy Sandiaga Uno also expressed concerns about the impact of high ticket costs on domestic tourism. He said the government has established a task force to suppress the airfare.

Bayu, who is also INACA Secretary General, said that his side acknowledged the issue but questioned the data used to reach this conclusion. “The data hasn't been shared, only the comments,” Bayu said in a message to Tempo on Tuesday, July 16, 2024.

Based on the dictionary, he clarifies that "expensive" means a price exceeding the previous price or higher than the appropriate price. In the case of domestic economy class tickets, the benchmark is the upper limit rate (TBA). “So, only prices above the TBA can be considered expensive,” Bayu remarked.

He further elaborated that the current TBA is based on the 2019 regulation with an average avtur price of Rp10,000 and a USD exchange rate of Rp14,200. Since both the fuel price and exchange rate are currently higher at above Rp14,000 and Rp16,000, respectively, Bayu questioned, “With ticket prices still within the TBA, can they be considered expensive?”

Bayu then broke down the final flight ticket price paid by passengers. This includes the base fare reflecting the operating costs of each route, Passenger Service Charge (PSC) or airport levies at up to 25-30% of the ticket price, and an 11% Value Added Tax (VAT) which will rise to 12% in 2025.

Additionally, mandatory Jasa Raharja contributions, fuel surcharges which have been implemented in August 2022 due to rising fuel costs, and unadjusted TBA restrictions contribute to the final price. “The Ministry of Transportation hasn't approved a TBA revision yet,” he noted.

Therefore, the final price paid by passengers includes tax payments to the government and the airport manager, rather than just the base fare. 

Bayu further outlined several cost components considered excessive, including luxurious airport terminal designs, leading to higher operation and maintenance costs ultimately borne by passengers through PSC. There are also inefficiencies in airport management, including throughput fees charged by airport managers, 0.25% Non-Tax State Revenue (PNBP) by the Downstream Oil and Gas Regulatory Agency, and 11% VAT on domestic aviation fuel.

Furthermore, extra fees are collected by the Indonesian Military (TNI) and airport authorities at civil enclave airports, such as civil airports based on TNI Air Force Bases, as well as taxes, import duties, and processes associated with importing aircraft components and spare parts.

“Just two months ago, the Coordinating Ministry for Maritime Affairs and Fisheries proposed an idea to incorporate tourism costs into flight ticket prices. That’s suggesting the assumption that ticket prices were considered cheap,” said Bayu. 

Meanwhile, he recalled the Minister of Tourism and Creative Economy's recent statement that business class tickets, not economy class, are the most expensive.

Bayu suggests several options for reducing flight ticket prices through lower and more efficient operating costs. For example, eliminating import duties, import income tax (PPh), VAT, and Sales Tax on Luxury Goods (PPnBM) on aircraft spare parts and components, removing VAT on domestic tickets, as international tickets are already exempt from VAT, removing VAT on aviation fuel for domestic flights, improving airport management efficiency to decrease PSC rates and airport facility rental costs.

“Everything is under the control of the government; it just needs political will,” INACA Sec-Gen concluded.

ILONA ESTHERINA | IKHSAN RELIUBUN

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