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THE HIGH price of domestic airfare continues to be controversial. No wonder, CEO of Capital A Berhad Tony Fernandes told reporters, Thursday (09/05), 2024, the cause of the soaring air fares.
To the Coordinating Minister for Maritime Affairs and Investment, Luhut Binsar Pandjaitan, the boss of Capital A, which is the parent company of PT AirAsia Indonesia Tbk. revealed the cause of the high price of domestic airfare such as avtur to taxes imposed more than once.
Regarding fuel or avtur, Tony noted that the price in Indonesia is even 28% higher compared to other countries. Avtur is 28% more expensive compared to Malaysia or Singapore. If in Malaysia the price changes every day, but in Indonesia [Pertamina] has a different mechanism that we do not understand.
Tony added that Indonesia should implement a multi-provider for fuel. It is known that currently only PT Pertamina supplies aviation fuel in the country. In addition to fuel, The taxes imposed on airlines are too high. In addition to VAT, his company is also subject to import taxes on spare parts.
He admitted that he has had discussions with the relevant ministries to remove the taxes on spare parts. In addition, Tony also claimed that the cap on airfares actually puts pressure on airlines to set ticket prices. According to Tony, when the price of aviation fuel and spare parts taxes are high, the upper limit rates (TBA) actually force airlines to lower ticket prices.
Tony pointed out that his party would discuss the high-ticket prices and the factors that influence them with Luhut.
Government seeks solutions
The Ministry of Transportation has confirmed that the proposal to eliminate air ticket taxes is being discussed by the relevant task force. The plan to abolish the tax is expected to reduce air ticket prices by up to 11%.
Meanwhile, Transportation Ministry spokeswoman Adita Irawati said that the elimination of ticket taxes is one of the long-term policy recommendations resulting from a study by the Transportation Policy Agency (BKT) of the Ministry of Transportation.
“The follow-up needs to be discussed across sectors in coordination with the task force. Our party does not have a specific target for the plan to abolish the air ticket tax. However, the party has calculated that if the tax is eliminated, the price of airline tickets could possibly drop by 9-11%,” Adita elaborated.
Earlier, the results of the BKT study also suggested the elimination of air ticket tax for airlines. In this way, BKT said, equal treatment could be created with other modes of transportation that have had their taxes eliminated, based on PMK No.80/PMK.03/2012.
On the other hand, the Minister of Tourism and Creative Economy, Sandiaga Uno, agreed if the ticket tax for airlines was eliminated. The airline ticket tax as one of the causes of the high price of airline tickets in the country.
“Super agree,” Sandiaga remarked at Menara Mandiri, Jakarta. Although Iagreed, the country needs to find other alternatives to replace the lost tax from airline tickets. Given Indonesia’s very limited fiscal space,” he affirmed.
On another occasion, Luhut said that the task force’s discussion on reducing air ticket prices would be completed by the end of August 2024. As of early September, however, no further information was available.
Minister Luhut also explained that the task force is currently discussing factors that affect ticket prices, such as the price of aviation fuel, taxes, the number of aircraft and spare parts.
“There are many factors involved, so we are talking about which costs we can reduce, such as the price of fuel [jet fuel],” Luhut told reporters Monday (08/19).
Furthermore, Luhut is optimistic that the discussion will be concluded in August. He added that his party has taken steps to make aviation fuel prices more competitive.
“Because how Pertamina’s aviation fuel has started to go down, because we are opening [multi-provider], it’s not just a Pertamina monopoly anymore,” Luhut concluded. [bisnis.com/photo special]
Number of air passengers actually increasing
The Central Bureau of Statistics (BPS) recorded an increase in the number of domestic and international air passengers to 6.04 million and 1.59 million, respectively, in July 2024.
Air passenger departures increased in July both on a monthly and yearly basis. For domestic air transportation, BPS recorded 6.04 million passengers or an increase of 11.04% on a monthly basis (MoM) compared to June which was 5.44 million passengers.
Meanwhile, on an annual basis (yoy), domestic air passengers increased by 1.53% compared to the same period last year of 5.95 million. As for international air transportation, BPS recorded an increase of 20.12% yoy to 1.59 million passengers compared to the same period last year of 1.33 million.
Meanwhile, on a monthly basis, international air passengers increased by 1.36% compared to June which was 1.57%.
Likewise, INACA Secretary General Bayu Sutanto said that the number of air passengers that increased when prices increased was a balance between demand and availability. This condition is a market mechanism.
“So, with the increase in demand, the price [of tickets] will shift to the high range or upper limit tariff [TBA]. If the demand decreases, conversely, the price will move down,” Bayu said when contacted on Thursday (09/2), 2024.
The increase in the number of departures occurred when the issue of expensive air tickets and the government’s efforts through the task force were made to overcome it. [bisnis.com/photo special]
