The Government Allows Aircraft Ticket Prices to 13 Percent

JAKARTA - The government has revealed that it has given room for an increase in domestic airfare prices in the range of 9 percent to 13 percent.

Coordinating Minister for the Economy Airlangga Hartarto, explained that a number of policies had been prepared to keep the increase under control within this limit.

He added that one of the main steps was the provision of a 11 percent Government-Covered Value Added Tax (PPN DTP) incentive.

Meanwhile, this policy applies to domestic scheduled commercial air transportation tickets, especially for economy class.

"Well, to maintain the increase in domestic tickets, keep the increase in ticket prices in the range of 9-13 percent with the first step of the 11 percent DTP VAT for domestic scheduled commercial air transportation tickets in the economy class, the amount of subsidy," he said in a press conference, Monday, April 6.

Airlangga said that the government allocated a budget of around Rp. 1.3 trillion per month to support this policy and this program will last for two months, so that the total budget prepared reaches Rp. 2.6 trillion.

"We give around Rp1.3 trillion per month. If we prepare 2 months Rp2.6 trillion so that the maximum ticket price is 9-13 percent," he said.

In addition, he added that the government also adjusted the additional fuel cost or fuel surcharge, which is now 38 percent for both jet and propeller aircraft.

Previously, the tariff for jets was only 10 percent and for propeller planes 25 percent.

"So if the increase in terms of jets is around 28 percent and for propellers 13 percent," added Airlangga.

Airlangga said the government also provided incentives in the form of zero import duty for aircraft parts.

"So, the aircraft spare parts are given a 0 percent entry fee so that it is expected to also reduce operating costs than airlines, and this was last year the entry fee from spare parts was around Rp500 billion or half a trillion," he explained.

According to him, this step is expected to reduce airline operating costs while increasing the competitiveness of the maintenance, repair, and overhaul (MRO) industry, with the potential for economic activity reaching US$ 700 million per year.

Furthermore, he said this policy together with the Non-Tax State Revenue (PNBP) incentive will be implemented for two months and will continue to be evaluated, especially considering global geopolitical conditions, including conflicts in the Middle East.

On the other hand, Airlangga said Pertamina also provided flexibility in the payment system for airlines to support the stability of the national aviation industry.

"The government also provides incentives for a reduction in import duties for aircraft reserve stores to 0 percent. So it's enough to spare the aircraft to be given a 0 percent entry fee, so that it is hoped that it can also reduce operating costs rather than airlines," he said.

Airlangga also highlighted the price of jet fuel in a number of countries, such as Thailand and the Philippines, which is higher than Indonesia.

In addition, he explained that the price of jet fuel is non-subsidized and follows the market mechanism.

Airlangga said that as of April 1, the price of jet fuel at Soekarno-Hatta Airport was recorded at around Rp. 23,551 per liter and the increase in jet fuel prices had a significant impact on airline operating costs, given that this component accounted for around 40 percent of the total cost of airline operations.