Airplane fares have doubled since the end of last year, and usually begin to drop after the New Year holiday. However, it has not dropped back to its normal fare until mid-January 2019. Domestic airlines all do the same thing, which raises allegations of cartel practices in the aviation industry.
The Business Competition Supervisory Commission (KPPU) said it had conducted research on a number of airlines related to the alleged cartel practices in determining flight fares. “A week ago, our team was working on the ticket fare. For cargo, the research runs as of today,” KPPU Commissioner Guntur Saragih said in his office, Monday (1/21).
However, he did not disclose how long the research would be completed. There are still further processes that need to be done. After the inspection, KPPU will collect secondary data and investigative data to re-verify the circulating information. He also could not confirm whether in the research there were indications of violations committed by airlines.
Prior to the inspection from KPPU, the Institute for Development of Economics and Finance (Indef) Economist Faisal Basri had suspected that there were unhealthy practices in the aviation business. He saw a conspiracy among airlines in determining fares. “I am not accusing, but it is necessary to check it with the KPPU. Is there a conspiracy? Because all are the same. When one airline raises its fare, then all of them increase their fares as well,” he said on Monday (1/14).
The indication can be seen from the steps taken by airlines, which jointly raised the fares. When the public was busy questioning the high price of airplane tickets, the airlines jointly reduced the ticket price. The decreasing number of scheduled airlines also has the potential to pave the way for the practice of fare collaboration among airlines.
Moreover, two big players dominated the national aviation industry after Citilink took over the operations of Sriwijaya Air and NAM Air. They are Garuda Indonesia Group (Garuda Indonesia, Citilink, Sriwijaya Air, and NAM Air) and Lion Air Group (Lion Air, Batik Air, and Wings Air).
With this condition, Faisal saw that the aviation market in Indonesia had entered the oligopoly phase. The market is only dominated by few players, so they can easily play the fares. This kind of practice violates Law No. 5/1999 on Prohibition of Monopoly and Unhealthy Business Practices.
Oligopoly indications can be seen from the lack of airlines serving certain routes, especially outside Java. He highlighted that direct flights from Batam to Jakarta are more expensive than the flights from Singapore to Jakarta because only a handful of airlines are serving the route. Meanwhile, airline ticket prices for flights from Singapore to Jakarta are cheaper due to competition against international airlines.
Lately, there has been a stir about residents in Aceh who made passports in order to be able to fly to Jakarta at a low cost. The reason is that ticket prices from Aceh to Jakarta are more expensive than the tickets to Jakarta via Kuala Lumpur (Malaysia).
According to the Indonesia Ombudsman commissioner Alvin Lie, international ticket prices are actually expensive. However, some neighbouring countries provide incentives to those who are able to bring tourists to their countries, and airlines become one of the targets. “Singapore provides US$ 100.000, 50 percent of which is given in cash and 50 percent in other forms [promotions, advertisements, etc.] for each route per airline,” he said in Jakarta (1/15).
The Minister of Transportation Budi Karya Sumadi dismissed allegations of a conspiracy or cartel practice in the aviation industry. There is no agreement among airlines to make ticket prices expensive. The fare increase is still within the range of the upper limit set by the government. “Cartel? I don't think so,” he said in Jakarta, Monday (1/21).