Indonesia's Garuda cuts air ticket prices under government pressure

Garuda shares fell 2.7 per cent on the news, underperforming the broader market. PHOTO: GARUDA

JAKARTA (REUTERS) - Indonesia's national flag carrier Garuda has slashed ticket prices by 20 per cent, the company said on Thursday (Feb 14), following a public outcry over high fares and a call by the country's president for airlines to offer cheaper tickets.

The move applies to all of Garuda's domestic routes as well as those of its low-cost subsidiaries Citilink Indonesia, Sriwijaya Air and NAM Air, executives said.

"This is in line with the aspirations of Indonesians, a number of national industry associations, and the (wishes of) the president of Indonesia, who wants a reduction in flight prices to support economic growth, especially in the tourism sector," Garuda chief executive Ari Askhara said in a statement.

The price cut would not affect the airline's income because it would help to increase the number of passengers, he added in a text message.

Garuda shares fell 2.7 per cent on the news, underperforming the broader market.

President Joko Widodo, who is seeking re-election in April, asked airlines this week to cut prices to help the hospitality industry boost occupancy rates. There have also been complaints from consumers over a spike in fares.

Analysts, however, said political meddling in the aviation sector was misguided and pressure to cut prices could compromise airline safety in a country with a long record of crashes and poor maintenance.

Mr Widodo on Wednesday ordered ministers to recalculate the price of aviation fuel to ease upward pressure on air fares, and called on state energy firm Pertamina to lower its jet fuel prices.

Pertamina did not immediately respond to a request for comment.

Garuda, which reported a modest profit last year after a poor start, is facing stiff competition from market leader Lion Air, which suffered the crash of a Boeing Co 737 MAX jet in October that killed 189 people.

Lion Air did not immediately respond to a request for comment on whether it planned to cut its prices.

Indonesia AirAsia, an affiliate of AirAsia Bhd, said in a statement that it would not cut prices.

Domestic air traffic has more than tripled in Indonesia over the past decade as rising prosperity and lower fares made flying affordable for more people.

With 129 million passengers in 2017, the South-east Asian archipelago is the world's 10th-largest aviation market and is projected to continue growing.

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