Flag carrier PT Garuda Indonesia announced on Wednesday that it had cut its ticket prices by 20 percent in response to complaints about the high cost of domestic air travel.
In addition to full-service Garuda Indonesia, the Garuda Indonesia Group also operates low-cost carrier (LCC) PT Citilink Indonesia, Sriwijaja Air and NAM Air.
“This is in line with the aspirations of the people and associations of some industries as well as guidance from the President about the need to decrease aeroplane ticket prices,” said Garuda Indonesia president director Ari Askhara in a statement.
“Garuda Indonesia airways Group believes the ticket price cut is in line with an intensive synergy among all stakeholders to maintain people’s access to air travel.”
Previously, President Joko “Jokowi” Widodo called for the lowering of aeroplane ticket prices after receiving complaints from the Indonesian Hotel and Restaurant Association (PHRI) about low occupancy rates in hotels, which it blamed on high aeroplane ticket prices.
The President also called on state-owned oil and gas holding company Pertamina to lower aviation fuel (avtur) prices, which was believed to be responsible for the high ticket prices.
Ticket prices were cut not only to boost tourism but also to help small and medium enterprises (SMEs) and other industries that relied on air transportation, he said, adding that synergy among stakeholders was also needed to maintain the sustainability of the country’s aviation industry.
“We assure that Garuda Indonesia airways Group is committed to maintaining the quality of its services with these competitive ticket prices,” he added.
Airports expansion across the archipelago
Indonesia’s largest airport operator is looking to spend billions of dollars to build a new facility in Jakarta and upgrade the existing one to cater to an unprecedented travel boom and compete with neighbouring countries for tourism revenue.
Angkasa Pura II, the state-owned operator of 16 airports across Indonesia, will conclude a feasibility study for a greenfield airport in the archipelago’s capital this year that may require an investment of about 100 trillion rupiah ($7 billion), according to President Director Muhammad Awaluddin. The company is already spending hundreds of million dollars in adding a new terminal and a runway in Jakarta’s Soekarno-Hatta International Airport, he said.
Airport investment plans are afoot in other Asian cities as well. South Korea’s Incheon International Airport is spending about 4.2 trillion won ($3.7 billion) to expand, while China is set to open its second airport in Beijing later this year at the cost of about 80 billion yuan ($12 billion). Malaysia Airports Holdings Bhd. said last year that it plans to double Kuala Lumpur International Airport’s capacity to 150 million in the next two decades or so.
The operator is in the process of selecting a strategic investor for Kualanamu International Airport in Medan, in Sumatra island. It sees the airport as a hub for airlines from Southeast Asia, East Asia, China and the Middle East with passenger volume surging to 17 million in three years from 11 million in 2018.
Angkasa Pura will call for proposals this month from 16 preferred bidders, mostly from Asia and Europe, which have expressed interest in becoming an equity partner, Awaluddin said. The selected partner may own a maximum of 49 percent in the venture operating Kualanamu airport, he said.
“Kualanamu is a sexy airport. In terms of productivity of the airport, it’s a profitable airport,” Awaluddin said. Sumatra, the second-most populous island in Indonesia with about 60 million people, holds vast potential for air traffic, he said.
Indonesia’s national flag carrier Garuda Indonesia airways has slashed ticket prices by 20 per cent, the company said on Thursday (Feb 14), following a public outcry over high fares and a call by the country’s president for airlines to offer cheaper tickets.
“This is in line with the aspirations of Indonesians, a number of national industry associations and the (wishes of) the president of Indonesia, who wants a reduction in flight prices to support economic growth, especially in the tourism sector,” Garuda chief executive Ari Askhara said in a statement.
The price cut would not affect the airline’s income because it would help to increase the number of passengers, he added in a text message.
Garuda shares fell 2.7 per cent on the news, underperforming the broader market.
President Joko Widodo, who is seeking re-election in April, asked airlines this week to cut prices to help the hospitality industry boost occupancy rates. There have also been complaints from consumers over a spike in fares.
Analysts, however, said political meddling in the aviation sector was misguided and pressure to cut prices could compromise airline safety in a country with a long record of crashes and poor maintenance.
Mr Widodo on Wednesday ordered ministers to recalculate the price of aviation fuel to ease upward pressure on airfares, and called on state energy firm Pertamina to lower its jet fuel prices.
Pertamina did not immediately respond to a request for comment.
Garuda, which reported a modest profit last year after a poor start, is facing stiff competition from market leader Lion Air, which suffered the crash of a Boeing Co 737 MAX jet in October that killed 189 people.
Among all the Garuda Indonesia Airways and the other aviation companies have not yet responded on the advice of Jokowi
Lion Air did not immediately respond to a request for comment on whether it planned to cut its prices.
Indonesia AirAsia, an affiliate of AirAsia Bhd, said in a statement that it would not cut prices.
Domestic air traffic has more than tripled in Indonesia over the past decade as rising prosperity and lower fares made flying affordable for more people.
With 129 million passengers in 2017, the South-east Asian archipelago is the world’s 10th-largest aviation market and is projected to continue growing.