Empty arrival gates at Kuala Namu International Airport in North Sumatra have become a common sight as high airfares discourage air travelers. (Antara Photo/Septianda Perdana)

Indonesia Mulls Opening Its Skies to Foreign Airlines

JUNE 06, 2019

Jakarta. A national discourse on opening Indonesia's skies to foreign airlines has resurfaced over the past week, as the authorities, businesses and consumers alike grapple with high airfares.

Ticket prices have nearly doubled on some routes since last year after the country's aviation industry consolidated into a duopoly.   

National flag carrier Garuda Indonesia and budget airline Lion Air now practically share the market of 94 million annual domestic air travelers. 

"The increase in prices of domestic flight tickets would not have been as sharp as this if the market structure was not a duopoly," Coordinating Economic Affairs Minister Darmin Nasution said on Wednesday, as quoted by news agency Antara.  

"Why do ticket prices suddenly rise? Of course, there are internal measures taken by airlines. But they can do that because there are no competitors," he said.

"If the market structure puts rather excessive strength or power in the hands of producers, then the answer is to invite competitors. So existing airlines will reduce their prices. That's the solution," Darmin added. 

It was President Joko "Jokowi" Widodo who first raised the issue of inviting foreign airlines when news website Kumparan asked him in an interview last week why price caps imposed by the Ministry of Transportation still failed to reign in prices. 

Major airports, such as Ngurah Rai International in Bali and Kuala Namu International in Medan, North Sumatra, reported 30 percent fewer travelers during this year's Idul Fitri homecoming season compared with last year. 

Tourist destinations also suffer, particularly those that are island-based and heavily rely on airlines, such as Bali and Bangka Belitung. 

"Maybe competition is lacking," Jokowi told Kumparan. "We will increase the competition, so [airlines] can become more efficient."

Transportation Minister Budi Karya Sumadi said he would review the possibility for foreign airlines being allowed to operate in Indonesia and compete with local airlines.

Indonesia currently caps foreign ownership of local airlines at 49 percent. The archipelago also never signed the International Air Services Transit Agreement, along with Brazil, China and Russia, preferring to keep tight control over its airspace.  
 
Local airlines further also only have a single supplier of jet fuel – state energy company Pertamina – which often charges more than the going rate in neighboring Singapore and Malaysia.

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