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Indonesia cracks down on cheap fares to boost airline safety
January 8, 2015 / 9:26 AM / 3 years ago

Indonesia cracks down on cheap fares to boost airline safety

JAKARTA, Jan 8 (Reuters) - Indonesia’s transport ministry has cracked down on the sale of cheap tickets for domestic flights to ensure airlines do not cut corners on safety, authorities said on Thursday, just over a week after an AirAsia flight crashed into the Java Sea.

The decision to tighten the rules on bargain fares came into effect on Dec. 30, two days after Flight QZ8501 crashed en route from Indonesia’s second-biggest city of Surabaya to Singapore. There were no survivors among the 162 people on board.

The transport ministry has raised the ticket price floor for economy class domestic flights, according to ministry documents seen by Reuters.

The ministry hopes the new rule will help airlines increase their profit margins so they can spend more on safety.

“We want the aviation sector to be healthy, not cheap. If it’s cheap, there are many things that might not be done,” Indonesian Transport Minister Ignasius Jonan told reporters on Thursday.

Airlines have to strike a balance between ensuring the safety of passengers and operational costs, Mohammad Alwi, an official at the transport ministry, told a news conference in Jakarta.

Indonesia has one of the world’s fastest growth rates in commercial aviation, but its safety record is patchy. In 2007 the European Commission banned all Indonesia-based airlines from flying to the European Union following a series of accidents.

Exemptions to that ban have since been granted to some carriers, including Garuda Indonesia and AirAsia.

Since the Indonesia AirAsia crash, the transport ministry has reassigned some officials and tightened rules on pre-flight procedures.

Alwi said the rule change on ticket pricing had “no connection with the accident” and that authorities had taken the decision to raise the floor on price sometime earlier.

The new rule will affect Indonesian airlines such as Lion Air, Indonesia AirAsia and Garuda, but several airline executives contacted by Reuters on Thursday said they were not too worried.

“In fact it means that we will not be attacked by competitors that have predatory pricing. It’s still far from Garuda’s average price,” said Arif Wibowo, Garuda’s chief executive.

The regulation is unlikely to hurt Sriwijaya Air’s sales as the carrier does not sell tickets at bargain prices, Agus Soedjono, senior manager for corporate communication at Sriwijaya Air, told Reuters.

“We will follow the regulator’s policy ... but don’t assume that cheap tickets mean we don’t pay attention to safety,” Soedjono said.

An Indonesia AirAsia spokeswoman declined to comment.

Under the new rule, airlines will only be able to sell tickets as much as 40 percent cheaper than the ceiling price set by the ministry. Previously, the price floor was 30 percent, although the ministry could grant some exemptions. (Additional reporting by Cindy Silviana in Jakarta and Fransiska Nangoy in Surabaya; Writing by Eveline Danubrata; Editing by Jeremy Laurence)

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