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Lion Air claims not making profit despite pricey airfares

Tempo - June 28, 2022

Tempo.Co, Fransisca Christy Rosana, Jakarta – Lion Air Group management claimed to not profit from the airfares of some routes despite the generally pricey flight tickets. The airline's managing director Daniel Putut Kuncoro Adi had even claimed that the company spent more on expenses due to numerous factors.

"There are various routes that despite being set to adhere to the price ceiling (TBA) are not able to profit from 100 percent seating capacity. Air carriers will not be able to run a flight route if we are enforced to follow the price ceiling rules," said Daniel in a hearing with House of Representatives (DPR) Commission V at the Parliament on June 28.

These higher operating costs occur due to changes in traffic and routes that affect travel time and fleet utilization. Daniel gave an example of the flight route from Cengkareng to Tanjung Karang which prior to the change, could be reached in 20 minutes. However, due to changes in traffic, the travel time had increased from 50 minutes up to an hour.

Daniel gave another example of one of the air carrier's routes from Bali to Lombok and back. With flight times that change due to following airport operating hours, airlines cannot achieve profits even though the seat load factor or optimal occupancy rate is 100 percent.

For this reason, Lion Air must carry out an auxiliary income policy strategy or additional income from other business lines. For example, maximizing cargo flights.

As a solution, Daniel then proposed to the Ministry of Transportation to review changes to the regulation of the Minister of Transportation Regulation No. 20/2019 that regulates the formulation for calculating upper and lower ceilings, which is used as the basis for the formulation of airfares, including Lion Air.

Source: https://en.tempo.co/read/1606611/lion-air-claims-not-making-profit-despite-pricey-airfare