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President's proposal to allow foreign airlines to ply domestic routes welcomed by businesses

Channel News Asia - June 7, 2019

Jakarta – President Joko Widodo's proposal to allow foreign airlines to operate Indonesian domestic routes with the aim of bringing down ticket prices has sparked a robust debate among stakeholders.

The business community, in particular, noted that this would boost competition and eventually benefit the tourism industry.

"I think it would be very helpful if foreign airlines enter Indonesia, it would create competition and improve efficiency," Indonesian Chambers of Commerce and Industry (KADIN) chairman Rosan Perkasa Roeslani was quoted as saying by news outlet Tempo.

Mr Widodo's proposal is being looked at by the transportation ministry, it said on Monday (Jun 3). Minister Budi Karya Sumadi said foreign airlines have to fulfil tough requirements to operate in the country.

"We will not easily accept all foreign airlines. Our aviation industry must still have high (standards)," he said, according to Jakarta Post.

To operate in Indonesia, a foreign airline has to abide by the cabotage principle of the aviation industry. It must first establish a company in Indonesia, with 51 per cent of the shares owned by Indonesian citizens.

Lauding Mr Widodo's proposal, Indonesian Hotel and Restaurant Association chairman Hariyadi Sukamdani said that travel agents and hotels have had to bear the brunt of expensive domestic tickets. "It certainly decreases occupancy rate," he said.

Mr Hariyadi opined that the current situation – with only two major players dominating the domestic routes – was restricting fair competition.

The two groups are Indonesian flag carrier Garuda Group (which consists of Garuda Indonesia, Citilink, Sriwijaya and Nam Air) and Lion Group, which operates Lion Air, Batik Air and Wings Air.

Mr Hariyadi said if a business introduces a price hike, its competitor would follow suit in order to gain profit. "The public was left with no choice," he said.

However, an academic has raised his concerns over the president's proposal, cautioning that inviting foreign airlines to serve domestic routes to lower ticket prices is an inappropriate move.

"In the long run, foreign airlines operating on domestic routes can result in the operations of local airlines eventually coming to a halt," University of Indonesia international law expert Professor Hikmahanto Juwana said in a statement on Thursday, according to Antara news agency.

But KADIN's Mr Rosan said local players do not have to worry if the quality of services appeals to customers.

"The presence of foreign airlines will push existing players to rethink their strategy on how to attract more passengers, and that is good," he said. CNA/tx(gs)

Source: https://www.channelnewsasia.com/news/asia/indonesia-proposal-foreign-airlines-to-ply-domestic-routes-11606038