The Indonesian government will increase the airfare price ceiling for scheduled flights.
The Indonesian transport ministry will be increasing airfare price ceiling for scheduled flights by October 2014 to lift the weight of losses. The airlines industry has been suffering massive declines in revenue because of rising fuel costs and depreciating national currency against the US dollar.
The government was asked by the Indonesian National Air Carriers Association (INACA) to lift the price ceiling mechanism on busy routes, which will not affect fares owing to severe competition.
The price ceilings set for various routes exclude 10 percent value-added tax, travel insurance and service charges or airport taxes.
While medium and low budget carriers can charge up to only 90 percent and 85 percent of the price ceiling, respectively, full service airlines, such as Garuda Indonesia and Batik Air, can charge up to 100 percent.
The ministry intends to conduct an immediate public survey to gauge public unanimity on the move, as people utilizing low budget airlines are sensitive to price shocks. It had earlier issued a tariff surcharge policy for domestic flights, as airlines had demanded one, owing to increasing aviation turbine fuel and depreciating currency.