National flag carrier Garuda Indonesia will begin direct flights on Wednesday (20/12) from Medan, North Sumatra, to Makassar, South Sulawesi, to strengthen connectivity between western and eastern provinces. (ID Photo/David Gita Roza)

Tax Incentives Needed Ahead of Asean Open Skies Says Industry Body

BY :L GORA KUNJANA

NOVEMBER 02, 2015

Jakarta. Indonesian air carriers have urged to government to relax taxation policies to help improve the industry's competitiveness ahead of the Association of Southeast Asian Nations open skies policy set to effect by the end of the year.

Arif Wibowo, chairman of the Indonesia National Air Carrier Association (Inaca), said two fiscal incentives — in the form of removal of import duty for aircraft spare parts and components as well as a lower taxations on operating leased planes.

These incentives will help airlines "reduce maintenance costs" and "help improve the competitiveness of carriers," Bayu Sutanto, chairman of the scheduled airline division of Inaca, clarified.

Carriers are currently facing increased operating costs, burdened by increased spending on the back of a weakened rupiah.

Indonesia has agreed to join a scheme to liberalize regional aviation markets. The agreement will take effect starting Jan. 1, despite concerns over the readiness of Indonesian airlines in the face of tougher competition.

The initiative is in line with the implementation of the Asean Economic Community (AEC) by the end of this year.

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