Airline Ticket Prices in Indonesia Are Increasing, Here’s What the Government Will Do

Flight Tickets Feel in Indonesia
Flight Tickets Feel in Indonesia Increasingly Expensive, Targeted to Drop by 2025

The rising prices of airline ticket in Indonesia have become a hot topic, drawing widespread concern among travelers. The government is taking swift action to address these complaints. Coordinating Minister for Maritime Affairs and Investment, Luhut Binsar Pandjaitan, has announced a series of strategic measures aimed at reducing ticket prices and making air travel more affordable.

“We are preparing several steps to enhance flight efficiency and bring down ticket prices, such as evaluating the operating costs of aircraft,” Luhut stated on his Instagram account on Thursday (July 12, 2024).

One of the key factors being scrutinized is the Cost Per Block Hour (CBH), the largest component of aircraft operating costs. Luhut emphasized the need to break down these costs and devise strategies to reduce CBH based on aircraft type and flight services.

“In addition, we plan to accelerate the implementation of policies to exempt import duties and lift restrictions on certain imported goods needed for aviation. Maintenance costs account for 16 percent of the total expenses after aviation fuel,” Luhut added, highlighting the importance of these measures.

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Furthermore, Luhut mentioned that the current tariff mechanism, based on route sectors, affects the imposition of Value Added Tax (VAT) and Jasa Raharja fees. He stressed the necessity to adjust tariff calculations based on the airline’s operational costs per flight hour to significantly reduce ticket prices.

“The tariff mechanism based on route sectors leads to double VAT charges, Jasa Raharja Mandatory Contributions (IWJR), and Passenger Service Charges (PSC) for passengers who transfer or change planes. Adjusting the tariff calculation based on the airline’s operational costs per flight hour will significantly lower ticket prices,” Luhut explained.

Another often overlooked aspect is the role of cargo revenue in airlines. Luhut pointed out that considering cargo revenue could be a significant factor in determining the upper fare limit. In line with this, the government is also exploring the possibility of VAT incentives borne by the government (PPN DTP) for several priority destinations.

“Evaluating the role of cargo revenue in airline income, which is often overlooked, could be a consideration in determining the Upper Fare Limit. The government will also explore the potential for VAT incentives borne by the government (PPN DTP) for some priority destinations,” he elaborated.

Starting from the time of this meeting, all these steps will be directly overseen by the National Airfare Supervisory Committee. This committee will conduct a detailed monthly evaluation of airline ticket prices to ensure that the measures are effective and that prices remain affordable for travelers.

In conclusion, Luhut emphasized the importance of these measures not only for reducing airline ticket prices in Indonesia but also for improving the overall efficiency and sustainability of the aviation sector in the country.