The Garuda Indonesia Group, including its Low Cost Carriers Citilink Indonesia, Sriwijaya Air and NAM Air Group, are reducing ticket prices on all routes by 20 percent according to local and regional newswires.

Garuda Indonesia President Director, Ari Askhara said the move follows a recent initiative made by the Indonesia National Air Carrier Association (INACA) to improve access to air connectivity for the community by supporting the government's efforts to encourage the growth of the tourism sector, MSMEs, and other national industries.

Jet fuel prices

Late last week, President Jokowi also ordered his ministers to recalculate the price of aviation fuel to try and ease the upward pressure on air fares and to respond to complaints from the Indonesian Hotel and Restaurants Association (PHRI) around low hotel occupancy rates across the country, calling on state energy firm Pertamina to lower its jet fuel prices, which it did over the weekend.

According to Bloomberg, Pertamina lowered the price of fuel sold at Jakarta’s Soekarno-Hatta airport by 3 percent to IDR 7,960 per liter (USD 0.56 cents) with company representatives saying the price of aviation fuel in Jakarta is still about 26 percent lower than Singapore’s Changi Airport.

Unacceptable increases

But the price reduction also has roots in growing domestic discontent over unaffordable airfares, especially over the most recent peak holiday period of Christmas and the New Year, when prices for some domestic flights doubled.

The Indonesian National Air Carriers Association (INACA), stated the price ranges were in accordance with the Transportation Ministry's regulations relating to maximum airfares and were still below the ceiling stipulated by the Transportation Ministry. But in a somewhat contradictory reaction to Garuda Indonesia's most recent price reduction announcement, Transportation Minister Budi Karya Sumadi told The Jakarta Post airfares for many Garuda Indonesia flights were still too high.

While government pressure does appear to have some positive results, The Straits Times, warns political meddling in the aviation sector was misguided and pressure to cut prices could compromise airline safety.

5th largest passenger market by 2035

Reuters are reporting Indonesia's domestic air traffic has more than tripled over the past decade as rising prosperity and lower fares have made flying a lot more affordable for more people.  

Indonesia’s air traffic jumped from 27 million in 2009 to 88.6 million in 2015, an almost 330 percent increase, according to the World Bank. Albert Tjoeng, a spokesperson for IATA Asia Pacific, told Aerotime, “Indonesia is expected to be the 5th largest passenger market in 2035, from 10th in 2015, with a market size of 242 million passengers.”

IATA also expects that by then the aviation industry will support 8.8 million jobs and contribute almost USD 100 billion of GDP. In addition, Indonesian aviation will contribute at least another USD 30-40 billion to the global economy by ordering new airplanes.

Sources: Bali Post, The Straits Times, Channel News Asia, Bloomberg, The Jakarta Post, Reuters, Aerotime, The World Bank

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