THE Ministry of Transportation has set the minimum price for airfares by Indonesian airlines at 40 per cent the cost of the highest priced ticket, a move likely to negatively impact travel business, say Indonesian travel agencies.
The rule was signed into immediate effect on December 30, 2014 and announced just after Indonesia AirAsia’s ill-fated flight QZ8501 accident.
This has stirred speculation that the government believes in a co-relation between fare price and safety compliance, which Muhammad Alwi, director of air transportation, Ministry of Transportation, has refuted.
He said that the increase of the floor price was due to escalating airline operational costs from the devaluation of the rupiah against the US dollar. “The Ministry has planned the revised regulation since October, (so) it has nothing to do with the recent accident,” he said, adding that it was done to help airlines maintain safety measures even in the face of rising operation costs.
The Indonesian travel trade expects the increment to affect LCCs the most. Edwin Himna, chairman of the Association of the Indonesian Tourist and Travel Agencies (ASITA) Jogjakarta Chapter, said: “Those who will need to travel will travel anyway, but it will be difficult to achieve the target growth of international and domestic travel set by the national government in the next five years.”
Currently, Edwin said, the cheapest fare during low season could be as much as 70 per cent below the ceiling price.
Rudiana, director of sales and marketing, WITA Tour, was pessimistic. “I have not seen any country setting lowest airline price but Indonesia. As a travel company, we do not benefit from LCCs as they distribute through their own website or OTAs.”
Rudiana predicts that travellers’ buying power would drop as a result of the regulation and in turn, passenger numbers.
