The Ministry of Transportation has reached a decision to increase the floor price of economy-class airfare for busy routes, to allow local airlines to cope with rising costs. (Antara Photo/Rivan Awal Lingga)

Gov't to Raise Floor Prices for Economy Class Airfare

OCTOBER 17, 2017

Jakarta. The Ministry of Transportation will increase the floor prices of coach class airfare for busy routes to allow local airlines to cope with rising costs.

The new floor prices will be as low as 40 percent of the ceiling price for 15 of the busiest routes, up from 30 percent currently, Transportation Minister Budi Karya Sumadi said on Monday (16/10). The regulator will enact the policy soon, he added.

"It is already discussed with the airlines and they agree. The 40 percent cap is a favorable price [for the airlines] so they can guarantee safety," Budi Karya said.

The ministry is concerned about the financial strength of local airlines and ensuring that airlines follow safety guidelines. Earlier this month, the ministry froze operations of Pontianak-based Kalstar Aviation for failing to meet financial and safety requirements.

Bayu Sutanto, the head of the scheduled airline division at the Indonesian National Air Carriers Association (Inaca), said that the lobby group demanded the ministry increase its lower caps for all routes.

"That is because we are seeing an increase in operational costs as there are more frequent aircraft holding during landing and delays when taxiing before take off," Bayu said.

Bayu said the the floor prices will only increase for 15 of the busiest domestic routes, but other flights will still retain the 30 percent of ceiling price costs.

"We have proposed raising the lower limit rate from 30 percent to 40 percent, as well as an increase in operational costs such as increased aircraft holding during landing and when taxiing before take off," Bayu said.

Bayu said Inaca is concerned that floor prices kept at 30 percent on other, less-crowded routes would make it difficult for small airlines — which typically operate such routes — to meet safety standards.