TEMPO.CO, Jakarta - The Indonesian government said it will keep the increase in domestic airfare prices within a range of 9 to 13 percent, despite rising aviation fuel costs triggered by escalating conflict in the Middle East.
Coordinating Minister for Economic Affairs Airlangga Hartarto said the policy is aimed at ensuring domestic flight tickets remain affordable for the public.
“To keep the increase in domestic ticket prices affordable for the public, the government will limit fare hikes to around 9 to 13 percent,” Airlangga said at a press conference in Jakarta on Monday.
The government’s decision comes in response to higher avtur—aviation turbine fuel—prices, which have surged amid geopolitical tensions in the Middle East.
To contain the impact on passengers, the government has prepared several support measures.
VAT Subsidy for Economy-Class Tickets
The first measure is a tax incentive in the form of government-borne value-added tax (VAT) for economy-class tickets, with the government covering the 11 percent VAT.
Based on the government’s calculations, the subsidy is expected to cost around Rp1.3 trillion (US$79 million) per month.
“With that calculation, the subsidy provided by the government is around Rp1.3 trillion per month. So if we prepare it for two months, that amounts to Rp2.6 trillion,” Airlangga said.
The policy will be implemented for two months and will be subject to further evaluation depending on developments in the Middle East.
Zero Import Duty on Aircraft Spare Parts
The second measure is a 0 percent import duty on aircraft spare parts, which the government hopes will help reduce airlines’ operating costs.
“Aircraft spare parts will be subject to a 0 percent import duty, so this is expected to also lower airline operational costs,” Airlangga said.
The incentive is projected to generate around US$700 million in annual economic activity, raise its contribution to gross domestic product (GDP) by up to US$1.49 billion, and create about 1,000 direct jobs, according to the government.
Higher Fuel Surcharge Cap
The government has also revised the upper limit on fuel surcharges, the additional fee charged by airlines to offset fluctuations in global fuel prices.
Transportation Minister Dudy Purwagandhi said the new maximum fuel surcharge has been set at 38 percent for all aircraft types, including both jet and propeller-powered planes.
Previously, the surcharge cap was set at 10 percent for jet aircraft and 25 percent for propeller aircraft.
Under the new policy, the cap for jet aircraft has increased by 28 percentage points, while the cap for propeller aircraft has risen by 13 percentage points.
“In setting the fuel surcharge, we coordinated with all airlines operating in Indonesia, especially domestic carriers, so we were able to determine that the increase in the fuel surcharge can go up to 38 percent,” Dudy said.
Aviation Fuel Prices Rise Across the Region
As of Monday, aviation fuel prices in Indonesia stood at Rp23,551 per liter.
Higher avtur prices have also been recorded in neighboring countries. In Thailand, aviation fuel was priced at Rp29,518 per liter, while in the Philippines, it reached Rp25,326 per liter.
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