TEMPO.CO, Jakarta - Low cost carrier (LCC) Indonesia AirAsia has expressed its objections to the recent regulation of price caps for airfares, which is due to come into effect this week. The airline hopes it would still be allowed to sell promotional fares, which it plans to sell below current market prices.
Indonesia AirAsia executive director Sunu Widyatmoko said that if regulating the lowest price at which an airfare can be sold would mean that LCCs would lose its competitive advantage over full-service carriers. "If the difference is insignificant, then travellers would shift from LCCs to full-service carriers," said Widyatmoko.
Under this new regulation, airfares that are priced more than 50 percent below newly established upper ceiling need to be approved by authorities before it could be sold to the public - which means that airlines need to lodge a proposal, which entails additional administrative cost for the airlines. "It would cost us more time and money if the government does not approve the proposal," said Widyatomoko to Tempo yesterday.
Widyatmoko's objections came after the Transport Ministry revealed its plan to regulate airfare prices by setting price caps on Monday. "Airlines who wishes to sell airfares at prices that are more than 50 percent lower than the upper price cap will be required to submit a written request to the Directorate General for Air Transport," said the Head for Air Transportation at the Transport Ministry Djoko Murjatmodjo, Monday.
Djoko believes that LCCs will not be disadvantaged by the new regulation, because the regulation is not aimed at regulating minimum prices for airfares, which is left for LCCs to decide at their own discretion. "LCCs have their own separate market anyway," said Djoko.
Widyatmoko hopes that the regulation will not disproportionately affect LCCs operations. "We hope that in the future, airlines would still be allowed to sell promotional fares."
MARIA YUNIAR | KHAIRUL ANAM