Gov’t Prepares Mitigation Approaches for Domestic Airfare

A Press Conference on Transportation and Fuel Policy held at the Office of Coordinating Ministry for Economic Affairs, Jakarta, on Monday (04/06)

The Government has maintained the domestic airfare increase for economy class around 9—13% as a result of the aviation fuel price surge, caused by global geopolitical tensions. Some policies include a fuel surcharge, the implementation of the 11% Government-Borne Value-Added Tax, and exemption from import duty on aircraft spare parts.

The 70—80% surge in aviation fuel prices has prompted the Government to adapt, given aviation fuel’s 40% contribution to airline operating costs. Coordinating Minister for Economic Affairs Airlangga Hartanto stated that aviation fuel is a nonsubsidized energy—its price is based on the global market—which needs to be adjusted.

However, the Government remains focused on maintaining purchasing power through some measures. “The Government has prepared strategic mitigation approaches for affordable fuel prices. We maintain the airfare price,” he said at a press conference on transportation and fuel policy held at the Office of Coordinating Ministry for Economic Affairs, Jakarta, on Monday (04/06).

He further explained the mitigation measures, which are: first, the implementation of the 11% Government-Borne Value-Added Tax for economy class airfare, using a budget of Rp1.3 trillion per month or Rp2.6 trillion for two months. Second, the limitation of the fuel surcharge at 38%, to adjust the ticket price without too much burden.

“To maintain its affordability, the Government set the airfare adjustment at 9—13%,” he added.

Further, the Government has also reduced import duty of aircraft spare parts to zero percent to reduce operational costs and improve aviation industry competitiveness. The domestic aviation fuel is relatively competitive compared to other Southeast Asian countries such as the Philippines and Thailand, Airlangga continued.

The Government has ensured national energy reserves are safe amid global dynamics. Minister of Transportation Dudi Purwagandhi emphasized that this policy was taken after a discussion with the industry stakeholders. “We had a discussion with all airlines, and we agreed on 38% [fuel surcharge] to balance between industrial need and the purchasing power,” he said.

Meanwhile, Minister of Finance Purbaya Yudhi Sadewa has ensured that fiscal supports are aligned with the policies. “Please, there is no need to worry, our state budget is safe, and these policies are well-considered,” he concluded.

 (AIT) (RD/LW)