News
Consolidation remorse?
May 17th 2019
Indonesia lowers maximum airfares amid concerns consolidation has been anti-consumer. Read More »
It is not uncommon to hear governments wonder if their oversight of mergers, joint ventures and codeshares have been anti-consumer and reduced competition. Typically, it is not easy or fast to make changes.
Indonesia appears to be having remorse about Garuda Indonesia last year absorbing third largest carrier Sriwijaya Air Group. That effectively turned the domestic market into a duopoly between the Garuda and Lion Air groups. Indonesia AirAsia is smaller and more focused on international flights.
Yet Indonesia is able to take action since air fare ceilings are regulated. The Indonesian government first tried a soft approach to have airlines lower fares. The government is now imposing 12%-16% lower maximum charges for domestic flights, effective May 17. AEC News said the government felt pressured to deliver change before Eid, the festival that celebrates the end of Ramadan.
A Jakarta Post article said people in Aceh “rushed in droves” in April to get passports because it was cheaper to fly from Aceh to Jakarta via Kuala Lumpur than on a domestic flight. It is unclear if this would violate cabotage rules unless passengers purchased one-way sectors.
An editorial in the Jakarta Post said there was an “utter lack of cooperation” from travel agencies and airlines to a government investigation into a possible price cartel.
