Indonesian agents cry foul over persistently high domestic airfares

Garuda brought down airfares, but only for bookings made via its own website and OTAs, some say

By Mimi Hudoyo and Kurniawan Ulung

Indonesian travel agents do not expect domestic airfares to go down to former levels as the government has raised the price floor on tickets, although local carriers announced over the weekend that they would be dropping their fares this month.

The Indonesia Ministry of Transportation announced last Saturday that the price floor for domestic economy class was increased from 30 per cent to 35 per cent, while the ceiling price remained the same.

Garuda brought down airfares, but only for bookings made via its own website and OTAs, some say

Nur Isnin Istiartono, secretary of the directorate general of civil aviation, was quoted by detik.com as saying: “The Ministry of Transportation (understands) consumers’ needs for lower prices. However, in this case, the government also wants to protect the sustainability of airline companies.”

While the government has ordered airlines to reduce their fares, the new price regulations means that airlines can still put the same highest price tags permitted by the government the way they have done in recent months. On the other hand, the lowest price will be higher than they used to be.

The ceiling price of Jakarta-Denpasar airfare, for example, is Rp1.6 million (US$114). The floor price used to be Rp495,000 and is now Rp578,000.

The new regulation came despite the impacts on travel demand within Indonesia as a result of high domestic airfares in recent months.

Indonesian airlines responded to the industry outcry with announcements that they would drop their prices as of April 1.

Lion Air Group, comprising Lion Air, Wings Air and Batik Air, announced it would reduce its airfares on all routes.

“The reduction of air ticket prices is Lion Air Group’s answer to challenges and opportunities in the travel business, and to accommodate the demand for air travel while improving flight operations,” Lion Air spokesman Danang Mandala Prihantoro said in a press release.

Garuda Indonesia announced a 50 per cent discounts on airfares from March 31 to April 13 to mark the 21st anniversary of the state-owned Enterprise Ministry.

“Reducing airfares is Garuda’s commitment to making its five-star-service affordable for all Indonesian people,” Garuda Indonesia commerce director Pikri Ilham Kurniansyah said in a statement.

However, a number of travel executives TTG Asia contacted yesterday suggested that domestic airfares still remained high.

Pauline Suharno, the managing director of Elok Tour was disappointed because the discounted prices of Garuda Indonesia’s airfares were not available through brick-and-mortar travel companies but via only OTAs and the airline’s official website.

On Traveloka, for example, Garuda’s airfare from Jakarta to Lombok was Rp1.3 million, down 30 per cent from Rp1.9 million last week.

She said: “For us, this is unfair. This is discrimination against travel agents.”

Pauline, who is also secretary general of ASTINDO, said that according to the reports from the association members, Citilink and Lion Air Group’s members had not dropped their airfares as per April 1.

Jenny Margaretha, owner of Vanessa Tour, confirmed that the airfares offered by the two LCCs remained high.

From a check on April 1, Lion Air’s fares from Jakarta to Medan, for example, was still priced at over Rp1.5 million, she said, adding that the price the industry was used to was around Rp800,000.

Jenny, who is also the ticketing coordinator in the Jakarta branch of ASITA expressed hopes that the government would check whether the airlines were complying with new regulations.

According to her observation, Garuda’s discounted airfares are only for certain routes such as Jakarta-Lombok route. She said that the airfares from Jakarta to Medan, for example, was still expensive as it was priced at around Rp2.4 million.

“ASITA had contacted Garuda to meet one of its directors (next week) to ask for the reason,” Jenny said.

Siti Aisyah, the director of Cahaya Mega Angkasa Tour and Travel in Banjarmasin, likewise reported that the ticket prices from Banjarmasin in South Kalimantan to Jakarta and other cities remained high.

She said before the airfare hikes, Citilink price for Jakarta-Banjarmasin round trip was Rp1.6 million. Today, that is the price for a one-way ticket.

High domestic airfares are not the only problem faced by travel companies. Ng Sebastian, the owner of Incito Vacations, in Makassar, South Sulawesi said that if the basic domestic fares offered by Lion Air and Wings Air excluded check-in baggages, he was not sure if the government’s new regulations would drive domestic travel.

“The negative impact of baggage allowance (as an add-on charge) is also faced by small and medium enterprises in tourist destinations because it has made travellers reluctant to shop gifts for their friends or family members when they are holidaying,” he elaborated.

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