Joko Widodo pushing to allow Foreign-owned airlines to operate domestic flight routes

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Newly re-elected president Joko Widodo has announced his intention to allow foreign-owned airlines to operate domestic flight routes.

The Indonesian Hotel and Restaurant Association (PHRI) has encouraged the Indonesian government to apply the open sky system. The open sky system will allow foreign airlines to conduct business in Indonesian airspace.

Hariyadi Sukamdani, chairman of PHRI remarked that the skyrocketing prices recently experienced in the airline ticketing business were caused by the lack of competition in Indonesia’s aviation industry. As a solution, he suggests that the Indonesian government co-operate with foreign airlines, allowing them to expand their business into Indonesia.

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“We had proposed to the government to allow regional airlines to enter Indonesia to add more domestic routes. It could be Jetstar, AirAsia, or other airlines, so this is certainly good news,” Hariyadi added.

The high prices of plane tickets have had a big effect on the tourism industry, especially travel agents and hotels. “With the spiking plane tickets, it certainly affects the hotel industry. It certainly decreases occupancy rates,” Hariyadi said.

He argued that with only two major players in Indonesia’s domestic airline industry, there is no fair competition, which leads to an unhealthy business cycle. He further explained that if one business increases its prices, its competitor would likely see an opportunity to also increase prices to gain higher profits, albeit lower than its counterpart.

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President Jokowi had initially expressed plans to apply the open sky policy by allowing foreign airlines to operate in Indonesia. This will, in turn, provide better competition among airlines, leading to lower ticket prices. The president also said that the government has tried to reduce plane ticket prices by lowering the upper limit and increasing the lower limit prices. Jet fuel prices have also been reduced, they constituted about 40 per cent of most airline operational costs.

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