JAKARTA: The Indonesia National Air Carriers Association (INACA) has renewed its call to increase the fuel surcharge and airfare cap (TBA), following the decision of state-owned energy giant Pertamina to raise domestic jet fuel prices as of April 1 by an average 70 per cent compared with the month prior.
The association had previously proposed a 15 per cent hike for both the fuel surcharge and the fare cap. As the prices of jet fuel, or aviation turbine fuel (avtur), have risen more sharply than anticipated, however, INACA is now seeking further adjustments in line with the latest hike.
At Sukarno-Hatta International Airport in Tangerang, for instance, avtur prices for domestic flights have increased from Rp 13,656.51 (US$0.80) per litre in March to Rp 23,551.08 per litre in April, a jump of 72.45 per cent.
Jet fuel prices for international flights have also surged, rising 80.32 per cent.
INACA chairman Denon Prawiraatmadja said the association had anticipated the jump in avtur prices as part of the global economic fallout from the fuel supply disruption due to the Iran war.
“As we projected previously, avtur prices will rise following global trends due to the geopolitical crisis in the Middle East. Therefore, we urge the government to immediately adjust the fuel surcharge and domestic airfare ceiling,” Denon said on April 2.
He underlined the urgency of such adjustments, as fuel expenses accounted for around 40 per cent of an airline’s operating costs. Without a timely policy response, air carriers risked severe financial strain, he added.
“Adjustments to the fuel surcharge and TBA need to be implemented immediately so that airlines can continue operating while maintaining flight safety, financial sustainability and national air connectivity,” Denon said.
Lawmakers have signaled caution in their approach. House of Representatives Commission VI, which oversees trade, business competition and state-owned enterprises, has said it will coordinate with relevant stakeholders to recalculate the proposed tariff adjustments while monitoring price transparency related to avtur.
The commission also said it would ensure that ticket prices were still affordable vis-a-vis purchasing power, including suggesting the government to consider subsidies to cushion the impact on air travel consumers.
“If the government provides subsidies, even if prices rise, this will not overly burden people who need to travel by air. We will raise this in working meetings so that stakeholders can recalculate and ensure that ticket [price] increases are not too heavy for the public,” Commission VI member Sturman Panjaitan said on Wednesday (April 1).
Earlier on March 30, Transportation Minister Dudy Purwagandhi said the government would review the airfare ceiling if fuel prices continued to rise due to the ongoing supply disruption precipitated by the Iran war, now in its second month.
“At present, the public still expects lower ticket prices. However, we must also anticipate global conditions, and we will study all possibilities,” Dudy said at the ministry in Central Jakarta, as quoted by business news outlet Katadata.co.id.
During the long Aidil Fitri holiday between March 14 and 29, the government eased several policies, which included reducing the fuel surcharge and avtur prices for a projected 17-18 per cent drop in airfares.
In contrast, the government decided during April 1’s scheduled adjustment to keep prices unchanged for both subsidised and nonsubsidised road fuel.
The day before, State Secretary Prasetyo Hadi said the decision followed President Prabowo Subianto’s instruction to “prioritise the interests of the people.”
However, analysts have warned the move could increase financial pressure on Pertamina, which would be left to absorb the gap between domestic and global oil prices, a burden that might eventually squeeze the state budget. - The Jakarta Post/ANN
