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DOMESTIC airline ticket prices are back in the spotlight after the government allowed airlines to increase rates by up to 50% of the upper limit rate or TBA.
Behind the rise and fall in ticket prices, there is a tariff regulation mechanism that has been used by the government to maintain a balance between price affordability for the public and the sustainability of the airline business.
Regulation of economy class domestic flight fares in Indonesia has actually been going on since Law no. 1/2009 concerning Aviation came into force. The government, through the Ministry of Transportation, determines two main instruments, namely the upper limit tariff (TBA) and the lower limit tariff (TBB).
According to Article 1 paragraph 5 of the Minister of Transportation Regulation no. 20/2019, TBA is the highest or maximum service price permitted by scheduled commercial airlines.
The TBB is the minimum ticket price that airlines can sell. This scheme only applies to domestic economy class flights. Meanwhile, international and domestic business class flight rates are left to market mechanisms.
Aviation observer and General Chair of the Association of Indonesian Aviation Service Users (APJAPI) Alvin Lie said the government regulates domestic airline ticket prices to protect consumers from price increases that are too high, especially during the peak season.
“The spirit of this regulation is to protect consumers on domestic economy class routes from ticket prices that are too high, especially during peak season,” he said recently.
Apart from protecting consumers, tariff regulation also aims to prevent unfair competition between airlines.
The government sets a lower tariff limit of at least 35% of TBA so that airlines do not sell tickets too cheaply in order to capture the market. Before the TBB policy was implemented, airlines often sold tickets at very low prices or even below operational costs to attract passengers. This practice is considered to pose a risk of disrupting the health of the aviation industry.
“Since TBB was implemented, there are no longer super cheap tickets,” concluded Alvin. [bisnis.com/photo special]
