Domestic airlines are given two weeks to adjust their airfares. (Antara Photo/Fikri Yusuf)

Transportation Ministry Issues New Airfare Regulation


APRIL 16, 2019

Jakarta. The Transportation Ministry has reached an agreement with domestic airlines to adjust airfares, following months of discontent among travelers who see the costs of air travel rising significantly since the beginning of this year.

Under the new regulation, prices of economy class tickets must be set somewhere between floor price (TBB) and ceiling price (TBA).

Transportation Minister Budi Karya Sumadi said the 2009 Aviation Law gives his ministry the authority to regulate economy class fares for commercial domestic airlines.

Domestic airlines are given two weeks to adjust their airfares.

"We will give Garuda [Indonesia] and Lion [Air] two weeks to follow what has been agreed upon. If they don’t, I will issue the subclass [fare regulation]," Budi said.

The agreement is quite simple. On each flight, 60 percent of economy class seats will be allocated to TBA tickets (20 percent), tickets that cost 90 percent of TBA (20 percent) and tickets that cost 60 percent of TBA (20 percent).

TBB tickets will be issued for 10 percent of the total seats, and the remaining 30 percent will be a mix of both TBB and TBA tickets.

Budi said the current high cost of air travel is the result of a price war between airlines in recent years.

Airlines have been selling tickets as cheap as possible to attract more passengers. However, the price war actually led carriers to operate at a loss because their overhead is higher than their revenue.

The price war virtually ended last year after Swiwijaya Airlines, the largest domestic operator outside of Lion Air and Garuda, gave up its operations to the latter.

Both Garuda and Lion started increasing their ticket fares and shipment costs for the logistics company. They even started charging more for what used to be standard services, like checked-in baggage. 

"[Ticket] fares become expensive to ensure the airlines can survive. They want to earn as much as possible so they can cover their expenses and make a profit," Budi said.

Transportation fare is heavily regulated in Indonesia. Less than a month ago, the ministry issued a fare regulation for online motorcycle taxis, despite the country's law having yet to recognize them as an official form of transportation.