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The Jakarta Post - Analysis: The competitive landscape of domestic airlines in Indonesia
by Haris Eko Faruddin, Mandiri, Jakarta
Airfares in Indonesia have surged significantly compared to previous times, primarily because of less intense competition between airlines. This lower competition has led to a continual adjustment of ticket prices, often resulting in higher airfares.
While competition among airlines initially seemed advantageous for consumers, with occasional discounts and promotions, the long-term effect has been an overall increase in the cost of air travel. Airlines, grappling with rising operational costs and seeking to maintain profitability, have resorted to adjusting their pricing strategies, thus contributing to the perception of air travel as a more costly endeavor in Indonesia.
Mobility is on the rise, yet the tourism sector in Bali has not fully recovered, indicating a need for additional support and stimulation. While there has been an increase in movement and activity within and around the island, the tourism industry continues to face challenges stemming from the lingering effects of the pandemic.
With visitor numbers still below pre-pandemic levels, there is a pressing need for further initiatives and incentives to revitalize the tourism sector.
In 2023, the number of domestic airline passengers was 62.7 million (81.7 percent of 76.7 passengers in 2019), while the number of international airline passengers was 15.6 million (82.8 percent of 18.9 million passengers in 2019).
On the other hand, at the end of 2023, several airlines recorded an increase in the number of aircraft they operated but still fell short of pre-COVID levels. Garuda Indonesia operated 71 planes (50 percent of the 142 aircraft operated in 2019), Citilink operated 59 aircraft (89.4 percent of the 66 aircraft operated in 2019) and the Lion Air Group operated 298 aircraft (85.1 percent of the 350 aircraft it operated in 2019).
The limited number of aircraft is one of the reasons that ticket prices remain high.
Based on data we gathered from Traveloka and FlightRadar24, we observed that the busiest routes, such as Jakarta-Surabaya, Jakarta-Makassar and Jakarta-Denpasar, tended to have higher per kilometer ticket prices. Flights from Denpasar to Australia had a cheaper price per km compared to domestic flights. This indicates that the domestic market is exploitative and highly competitive.
To ensure a fair and competitive market environment while promoting the growth and sustainability of the aviation sector, the government plays a crucial role in implementing measures to address the challenges posed by this competition.
First, it is imperative for the government to increase the number of aircraft in operation, particularly for Garuda Indonesia and Citilink, which are state-owned enterprises (SOEs).
Garuda Indonesia requires special support from the government because of its financial burden, which is currently being addressed through financial restructuring.
As a national carrier and an integral part of Indonesia's aviation industry, Garuda Indonesia plays a crucial role in connecting the archipelago and facilitating both domestic and international travel.
In addition to Garuda Indonesia, Citilink, as a subsidiary of Garuda Indonesia, also requires governmental assistance to expand its fleet. As a budget airline catering more to domestic routes, Citilink holds significant potential for stimulating domestic tourism and enhancing connectivity within the country.
By providing Citilink with additional aircraft, the government can facilitate its growth and enable it to serve more destinations efficiently.
Second, the Business Competition Supervisory Commission (KPPU) should closely monitor the aviation industry to prevent price collusion and ensure fair competition. By actively overseeing the sector, the KPPU can deter anticompetitive practices and safeguard consumers from inflated prices.
Given the significance of air travel for both domestic and international connectivity, it is crucial to maintain a competitive market environment where airlines compete fairly based on service quality and efficiency rather than engaging in collusive behavior that could harm consumers and hinder economic growth.
The government should enforce safety standards in the aviation industry to safeguard passengers. Efficiency should never come at the expense of compromising safety, as this could pose significant risks to passenger well-being.
By maintaining stringent oversight and adherence to safety protocols, regulatory authorities can mitigate potential hazards and ensure that airlines prioritize the safety and security of their passengers.
Neglecting safety standards in pursuit of efficiency could have detrimental consequences, undermining public trust and jeopardizing the reputation of the aviation sector.
Therefore, it is essential for the government to uphold and enforce robust safety regulations to protect the interests and safety of air travelers.
