KPPU Probes Lion Air`s Decision to Reduce Services on 56 Routes

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  • TEMPO.CO, Jakarta - The Head of the Business Competition Supervisory Commission (KPPU), Syarkawi Rauf, said that his Commission will begin an investigation into Lion Air's decision to suspend services to 56 destinations for a month without any reasonable justification. According to Rauf, Lion Air's decision could be classified as an abused of its' dominant position in Indonesia's aviation industry.

    "According to Indonesia's Anti-Monopoly and Unfair Competition Law, a dominant market player cannot use their dominant position to cause substantial changes to the supply of services or goods, which could cause prices to spiral out of control," said Rauf through an official statement released on Saturday, May 21, 2016.

    Rafu also said that KPPU will support the Transport Ministry's plan to impose tough sanctions on airline operator that continuously violates existing regulation - especially in the aviation industry, where regulations are very stringent. "KPPU calls on all airline operators such as Lion Air - which controls a significant portion of the domestic market - as well as other low cost carriers, to cease conducting unfair practices that ultimately victimises consumers," he said.

    Furthermore, Rauf also called on the Transport Ministry to revoke regulations about the lower price cap in the aviation industry. Currently, the lower limit for an airline ticket is capped at 30 percent below the highest fare available in the class for a particular destination. KPPU considers this regulation as counterproductive, as it has not lowered the incidence of violations by airline operators. "In fact, this regulation has caused a drop in the overall number of passengers for certain routes," he said.

    Instead of putting a cap on prices, continued Rauf, the Transport Ministry should impose tougher sanctions on airlines that continuously violates civil aviation regulations - such as Lion Air - to ensure the safety of Indonesia's aviation industry. "Tougher sanctions make more sense," said Rauf.

    "To date, we have seen no correlation between setting a cap on ticket prices and safety and frequency of violations," said Rauf.

    Previously, the Transport Ministry imposed a sanction on Lion Air - following an extremely high number of complaints about flight delays, as well as its' pilots' strike on May 10. Under the sanction, which came into effect on May 18, 2016, Lion Air cannot apply for permits to open scheduled passenger for six months, until it could improve its' the operations and management of its' fleet and services.

    However, Lion Air's management said that instead of forbidding the airline from starting services to new destinations, it proposes - through a letter filed to the Transport Ministry on May 16, 2016 - to decrease the frequency of 217 scheduled passenger services, which affects 54 domestic routes and two international routes, to which the Transport Ministry caved in and agreed to Lion Air's proposal.