AIRFARES on Indonesian airlines are poised to increase when the Ministry of Transportation raises the price ceiling for economy class tickets by 10 per cent next month to help local carriers cope with fuel costs.
With the new regulation in place, the upper limit of a Jakarta-Bali ticket will increase from Rp1.4 million (US$115) to Rp1.5 million, based on an aviation turbine fuel cost of Rp13,000 per litre at the exchange rate of Rp12,000 for every US dollar.
The increase is a revision to the limits on fare prices imposed by the government in 2010, and comes in response to a request by the Indonesian National Air Carriers Association (INACA), which had sought government support to ease the burden on the aviation industry from the depreciation of the rupiah.
Chairman Arif Wibowo said the association had appealed to the government to hike the price ceiling by 25 per cent, but expressed satisfaction at the 10 per cent increase.
Arif noted that the revised price ceiling did not automatically and uniformly bump up economy tickets prices, as market forces would continue to have a hand in price determination.
“Airlines will not sell tickets at maximum price when it is low season or at certain hours of (the day or week). But when demand is high, we need to have more room to increase the price so that airlines will be able to continue to be operational in the face of the high fuel costs,” he said.
