Jakarta – A University of Indonesia (UI) international law expert has cautioned the government over its plan to invite foreign airlines to serve domestic routes in an attempt to push down airfares in the country.
"High ticket prices should not be a reason [for the government] to liberalize the national aviation industry," UI law expert Hikmahanto Juwana said on Thursday as quoted by Antara news agency.
President Joko "Jokowi" Widodo expressed his intention to invite foreign airlines to serve domestic routes after a lukewarm response from domestic airlines on government intervention in lowering airfares. Transportation Minister Budi Karya Sumadi said the ministry was studying the President's idea.
Hikmahanto said the government had to determine three factors before making a decition on the matter.
First was the principle of cabotage, under which domestic routes should be served by the domestic airlines. He pointed out the existence of a "universal prohibition" for foreign airlines to serve the domestic routes of other countries, except in cases where domestic carriers lacked the capacity to serve the routes.
Second, high airfares was not an appropriate reason for inviting foreign airlines to serve domestic routes, as such a move would kill the domestic airline industry in the long term.
Third, allowing foreign airlines to operate domestic routes would cause negative long-term impacts, because the government would find it difficult to curb further entry of foreign airlines into the country, including the possible acquisition of domestic airlines.
Hikmahanto pointed out that inviting foreign banks was considered a solution in the past, but foreign banks were now starting to acquire local banks. He warned that the same thing could happen in the domestic airline industry if the government opened its doors to foreign airlines.
Earlier, minister Budi said that foreign airlines seeking to operate domestically were required to establish an Indonesian company with 51 percent local ownership. (bbn)