Ministry readies efficiency measures to reduce air ticket prices

Jakarta (ANTARA) - Indonesia’s Coordinating Minister for Maritime Affairs and Investment Luhut Binsar Pandjaitan announced that his ministry has devised aviation efficiency measures to lower flight ticket prices, which involve evaluating aircraft operating costs.

He made the statement in an Instagram post, responding to public complaints about high flight ticket prices.

Luhut emphasized the need for detailed calculation of the cost per block hour (CBH), which constitutes a significant portion of aircraft operating costs.

"We are also formulating a strategy to reduce the CBH value based on aircraft type and flight service," he said on the post, which was accessed on Thursday.

Luhut mentioned that the government intends to expedite policies related to exempting import duties and easing restrictions on specific imported goods for aviation purposes.

"The maintenance portion is 16 percent of the total portion after aviation fuel," he remarked.

Luhut explained the mechanism for imposing tariffs based on route sectors, which has implications for the imposition of two VAT rates—the Mandatory Jasa Raharja Contribution (IWJR) and Passenger Service Charge (PSC)—for passengers who transfer or change planes.

He clarified that adjusting the fare calculation mechanism according to the airline’s operational costs per flying hour will significantly reduce flight ticket prices.

Luhut underscored the importance of evaluating the contribution of cargo to airline company revenues.

He emphasized the significance of assessing the cargo’s impact on airline company revenues.

“This can be used as a consideration in determining the maximum ticket prices," he said. "The government will also look into opportunities for government-borne value-added tax (PPN DTP) incentives for several priority destinations."

All efficiency measures will be directly controlled by the National Air Transport Ticket Price Supervision Committee. They will evaluate ticket prices every month.

"As compared to ASEAN countries and high-population countries, Indonesia's airfares are the second most expensive after Brazil," Luhut said.