Increase in Airfares Deemed Unusual

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JAKARTA, KOMPAS — The increase in plane ticket prices can be considered unusual. This reflects in the jump of the contribution of airfares to inflation until May 2019. One way out is to make the aviation industry more efficient.

"Usually, the share of airfares in inflation is only 2-4 percent, and that is only for the Idul Fitri festivities or at the end of the year," Statistics Indonesia (BPS) head Suhariyanto said in Jakarta at a working meeting with Commission XI of the House of Representatives (DPR) on Monday (17/6/2019) evening.

"As of May 2019," Suhariyanto added, "the share of airfares in inflation is more than twice that, at 9 percent."

It could be concluded from the BPS data, Suhariyanto said, that a surge in airline ticket prices had hurt tourism. Hotel occupancy, for example, had dropped from 57.4 percent to 53.9 percent. The number of airline passengers as of April 2019 had fallen by 28.5 percent from April 2018.

Institute for Development of Economics and Finance (Indef) researcher Nailul Huda said the government\'s plan to open flight routes for foreign airlines would not automatically bring down airfares, because the main problem of inefficiency in the domestic aviation industry had not been overcome.

Airplane occupancy in Indonesia is 78 percent, which is higher than the breakeven load factor (BLF) of Asia-Pacific airlines at 67-69 percent.

"Why then are [the airlines] suffering losses? It can be concluded that Indonesian airlines are inefficient," said Nailul. According to Nailul, inefficiency can also be caused by the opening of new routes that are not profitable.

Falling prices

The price of avtur (aviation turbine fuel), said Nailul, was also often blamed. In reality, however, avtur prices in Indonesia are lower than in Singapore or Malaysia. The prices of avtur sold by state-owned oil company Pertamina have even dropped 16 percent from November 2018 to Rp 8,210 per liter in the first quarter of 2019.

The more expensive flight tickets have hit tourism in a number of regions, such as West Sumatra, North Sumatra, Banda Islands in Maluku, Batam, South Kalimantan, and Batu in East Java.

"Today, there are no domestic tourists in Banda. The number of foreign tourists has also fallen 50 percent. The reason is that the price of airline tickets is considered high," said Reza Tuasikal, a tourism businessman in the Banda Islands.

Based on a search by Kompas in ticket sales applications, airfares for the Jakarta-Ambon route started at Rp 2.7 million on Wednesday. In the recent past, tickets for that route would be sold at prices starting at Rp 900,000.

In Batam, the number of domestic tourist arrivals has dropped by 60 percent. Pricey domestic tickets have encouraged residents to go on vacation in Singapore or Malaysia instead.

"If this situation continues, many hotels and restaurants will go bankrupt," said the chairman of the Riau chapter of the Association of Indonesian Hotels and Restaurants (PHRI), Muhammad Mansyur.

"If the government does not intervene to deal with the problem of ticket prices, tourism entrepreneurs will be defeated by Singapore and Malaysia," Mansyur said. ( KRN/ NSA/JOL/ FRN/ NDU/ WER/ SYA/ ETA)

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