JAKARTA, April 6 — Indonesia has moved to cap domestic airfare increases at between nine and 13 per cent, rolling out measures to ease cost pressures on airlines from rising jet fuel prices while keeping tickets affordable for the public.
Economic Affairs Coordinating Minister Airlangga Hartarto said the measures come as rising aviation turbine fuel (avtur) prices amid global geopolitical and geo-economic developments continue to put pressure on carriers, with fuel accounting for around 40 per cent of airline operating costs.
“Avtur is a non-subsidised fuel with its price following market developments, and of course, if we do not make adjustments, various airlines can take advantage of the price differences.
“Therefore, the government is preparing strategic mitigation measures so that ticket prices remain affordable for the public. What we aim to maintain is ticket prices,” he said during a media conference today.
Airlangga added that as of April 1, the avtur price at Soekarno-Hatta International Airport had reached around 23,551 rupiah (RM5.57) per litre, while in Thailand it was around 29,518 rupiah (RM6.98) and in the Philippines it was around 25,326 rupiah (RM5.99).
He said the measures include the government bearing the 11 per cent value-added tax (VAT) on economy-class domestic tickets, which would be implemented with the subsidy estimated at about 1.3 trillion rupiah (RM307.4 million) per month.
To accommodate the cost increase, the Transportation Ministry has raised the fuel surcharge to 38 per cent, based on the upper tariff limit set in 2019 and applied uniformly to both jet and propeller aircraft.
The surcharge previously stood at 10 per cent for jet aircraft and 25 per cent for propeller planes.
“The fuel surcharge and VAT-borne-by-government policy will be implemented for two months in line with the previously announced programme and will continue to be evaluated depending on geopolitical developments and conflicts in the Middle East,” Airlangga said.
Similarly, the government has granted Pertamina flexibility in its payment arrangements with airlines through business-to-business terms. To maintain and enhance the competitiveness of the aviation ecosystem, it is also providing incentives by reducing import duties on aircraft spare parts to zero per cent.
This is expected to lower airline operational costs, noting that import duties on spare parts amounted to around 500 billion rupiah (RM118.2 million) last year.
“This policy is expected to strengthen the competitiveness of the maintenance, repair and overhaul industry, with potential economic activity increasing by about US$700 million (RM2.81 billion) per year, contributing up to US$1.49 billion (RM6 billion) to gross domestic product and creating about 1,000 direct jobs and nearly three times as many indirect jobs.
“This will be followed up with the issuance of technical regulations, including those from the Finance Ministry and the Industry Ministry,” he said.
Airlangga noted that the initiatives form part of the government’s broader commitment to support the sustainability of the national aviation industry while maintaining affordability for consumers amid global economic uncertainties.
