Aviation Stakeholders Discuss Indonesian Aviation Industry Polemics

Jakarta, InfoPublik – The soaring price of domestic flight tickets since the end of 2018 and the alleged duopoly and ticket cartels in the aviation market structure has been a public concern for most of the year. This situation was believed to be caused by inefficiencies in airline operations which were supported by factors such as the high cost of aircraft fuel and maintenance, to the import duty of aircraft and spare parts.

Commenting on the ticket high prices, Transportation Minister Budi Karya Sumadi warned that the aviation industry must be sustainable but at the same time considers the public's ability.

"The government is paying attention and trying to find a meeting point or equilibrium where the industry and people’s needs meet ," said the Budi Karya when giving a Keynote Speech on a Panel Discussion and Focus Group Discussion themed "Polemics and Prospects of the Aviation Industry: Airfares, Competition and Competition Efficiency” at JS Luwansa Hotel, Jakarta, Wednesday (9/25).

Transportation Ministry’s Air Transportation Director Maria Kristi Endah stated that the discussion concerned on a number of subjects including ticket prices, the causes of ticket price spikes, ticket financing components and the structure of the aviation market.

"We have done a very careful and detailed calculation of the structure of flight costs and tickets and we evaluate them every three months with the airline company," said Maria.

Indonesian National Air Carriers Association (INACA) researcher chairman Wismono Nitidihardjo said that the cost structure of flights was dominated by high operational costs, one of which was triggered by the price of aviation fuel in Indonesia which was more expensive than in neighboring ASEAN.

"So far, our aviation fuel is expensive because of the dominant imported components," he said.

Indonesia University’s Head of Research in Digital Economy and Behavioral Economics Chaikal Nuryakin sees that ASEAN countries are now in the era of Open Sky Policy that applies the ASEAN Single Aviation Market (ASEAN-SAM). However, the domestic market condition, in fact, faces barriers to entry, such as the minimum 5 aircrafts rules, the amount of capital, and the single majority ban on foreign ownership.

"These factors hinder market openness," Chaikal said.

Principal Consultant in Aviation, Ian Ventures Sdn Bhd, Jaafar Zamhari shared his views on Malaysia’s airline industry. According to him, Malaysia has allowed airlines to operate with a minimum of 4 aircrafts, with two self-owned aircrafts, and airlines are allowed to have the other two aircrafts on lease. The Malaysian government also provides spare parts import duty relief. (Reporter: Isma, Translator: Wilda Stiana)