Indonesia tells airlines to trim fares without compromising safety

[May 16, 2019]   By Cindy Silviana

JAKARTA (Reuters) - Indonesia's transport ministry has trimmed the maximum fares airlines can charge for domestic routes, effective later this week, as millions of Muslims prepare for homecoming trips at the end of the fasting month of Ramadan.

The transport ministry, which regulates how much airlines can charge for flights, lowered the ceiling prices for domestic routes by 12%-16% starting this Friday, Polana Banguningsih Pramesti, director general of air transport, said in a news conference on Thursday.

The government of Southeast Asia's largest economy had earlier pressured airlines to cut fares, but ticket prices remained steep due to increasing costs triggered by a weak rupiah and high fuel prices.

The high prices have weakened the appetite for air travel and fed inflation. Lower household spending on travel and accommodation has partly contributed to slower growth than expected in the economy, a rate of 5.07% in January-March.

Airlines should be able to implement these price cuts by improving their efficiency at airport operations, Pramesti said, adding that they should not compromise safety and other "substantial factors".

A passenger waiting for her flight to depart watches a plane take off from the domestic terminal at Ngurah Rai International Airport, in Kuta, Bali, Indonesia December 4, 2017. REUTERS/Darren Whiteside

Pikri Ilham Kurniansyah, commerce director of flag carrier Garuda Indonesia, told reporters he has not seen the new regulation, but said "ideally this shouldn't apply to tickets already sold".

Privately owned Lion Air Group will adjust its tariffs and margins according to the new rules, Managing Director Daniel Putut said.

The carrier issued a statement separately on Thursday offering a 50% discount for limited seats between May 16 and June 15, especially for people looking to come home for the Eid al-Fitr festival early-June.

The transport ministry will review its pricing rules every three months for evaluation, its director general added.

(Additional reporting by Wilda Asmarini, Writing by Gayatri Suroyo, Editing by Sherry Jacob-Phillips)

[© 2019 Thomson Reuters. All rights reserved.]

Copyright 2019 Reuters. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.  Thompson Reuters is solely responsible for this content.