Balipost.com reports that Indonesia’s energetic Coordinating Minister for Maritime Affairs and Investment, Luhut Binsar Pandjaitan, is preparing steps to increase efficiency in Indonesia’s commercial aviation sector, which he says will lead to lower airline fares.
Among the areas being reviewed and assessed by the Minister are aircraft operating costs. On Thursday, 11 July 2024, Luhut said: “We have prepared several steps to improve the efficiency of airline operations and help reduce ticket prices. One tactic would be to review the cost of aircraft operations.”
Luhut continued, explaining that the Cost Per Block Hour (CBH) for an aircraft needs to be reduced based on the specific aircraft type and service level each air carrier offers.
Luhut said the Government plans to accelerate steps to remove or reduce customs duties and liberalize import restrictions on certain items necessary for flight operations.
Luhut said that 16% (after fuel) of the cost of operating an aircraft is spare parts.
Luhut also addressed how airfares are calculated based on the nature of the route, which sometimes results in double sales tax charges, obligatory fees charged by the insurance provider Jasa Raharja, and double Passenger Service Charges applied to transit flights.
Luhut said a revision of CBH calculations will allow the price of tickets also to be recalculated,
The role played by income earned by the airline from cargo/freight also needs to be counted in determining airfares. The contribution of cargo income should also be considered in setting maximum airfares. The Government could also calculate revised value-added-tax rates for specific prioritized destinations to encourage more travel.
Luhut said that the Supervisory Committee for the Pricing of National Air Carriers will review all steps to increase airline operations monthly.
Based on data from the International Air Transport Association (IATA), 4.7 billion international air passengers are projected for 2024. This is an increase of 200 million over the total passenger numbers recorded in 2019.
Luhut lamented that compared with other members of the Association of Southeast Asian Nations (ASEAN) and other populous nations, the cost of air travel in Indonesia is the second most expensive after Brazil.
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