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The Government Aims To Reduce Airline Ticket Prices; However, INACA Reports That Airlines Are Still Operating At A Loss

The Indonesia National Air Carriers Association (INACA) has responded to the government's initiative to reduce airfare prices. The forthcoming policy from the government involves a 10 percent reduction in the Upper Limit Tariff (TBA) or the elimination of the fuel surcharge, effective during the peak season of Christmas 2024 and New Year 2025 (Nataru). INACA's Chairman, Denon Prawiraatmadja, emphasized that the financial situation for airlines remains challenging, with all carriers still incurring losses due to operational costs exceeding their revenues. "Essentially, airlines require additional income to cover operational expenses and achieve profitability, ensuring the sustainability of their business and maintaining safe, secure, and comfortable air transport connectivity," stated Denon, as quoted in an official announcement on Wednesday, November 20, 2024.

1. The revenue of airlines is expected to decline.

With the implementation of the aforementioned policies aimed at reducing airfare, INACA anticipates a decrease in airline revenues. "The government's proposed policies will inevitably lead to a reduction in airline income, while the expenses incurred will remain unchanged," stated Denon.

2. Airfare could be reduced if the VAT on tickets and import duties on aircraft spare parts are eliminated.

Nevertheless, the price of airline tickets can still be reduced, provided that the government implements policies aimed at decreasing the cost components involved in ticket pricing. Denon stated that there are six policies that could lead to a reduction in airline ticket prices.

3. AHY aims for a reduction in airfare prices before December

Previously, the Coordinating Minister for Infrastructure and Regional Development, Agus Harimurti Yudhoyono (AHY), stated that the government is targeting a decrease in airfare prices this month. Efforts in this regard are still under discussion in a coordination meeting among relevant ministries. "Two days ago, we held a coordination meeting between the Coordinating Ministry for Infrastructure and the Coordinating Ministry for Economic Affairs. This matter falls under the purview of the Coordinating Ministry for Economic Affairs, which includes not only the Ministry of Transportation but also the Ministry of Finance, the Ministry of State-Owned Enterprises, the Ministry of Energy and Mineral Resources, and the Ministry of Tourism," AHY remarked on Friday (November 15). Additionally, the Task Force for Reducing Airfare Prices, comprising the Coordinating Ministry for Economic Affairs, the Coordinating Ministry for Infrastructure and Regional Development, the Ministry of Transportation, the Ministry of Tourism, the Ministry of State-Owned Enterprises, the Ministry of Finance, and other relevant ministries and agencies, continues to comprehensively evaluate the plan to lower airfare prices.

Tag: Airline Ticket Prices INACA Upper Limit Tariff