Indonesian carriers resist ASEAN’s open sky policy

JAKARTA — Indonesia’s aviation industry is not ready to implement the ASEAN Economic Community’s (AEC) plans for a single market by the end of next year unless the government helps reduce airlines’ costs by simplifying tax codes, curbing airport inefficiencies and reducing the cost of jet fuel, executives from airlines operating in the country said.

Under the AEC framework, the Association of Southeast Asian Nations (ASEAN) is moving towards a single aviation market through an open sky policy, which would seek to harmonise the varying trade regulations of the 10 member states with the aim of higher efficiency, better connectivity and cheaper fares.

But Indonesia’s domestic carriers have resisted fully joining a unified regional aviation market by actively lobbying the government to protect or mitigate perceived threats posed by competitors in Singapore, Malaysia and Thailand.

While the country could potentially offer foreign carriers plenty of access points, only five airports have been put forward for the open sky policy that the bloc’s member states agreed to schedule for take-off by the end of next year.

They are the Soekarno-Hatta International Airport in Banten province and airports in Surabaya, Medan, Makassar and Bali.

Airlines have taken recently to reminding the government that they are not ready for such liberalisation.

Mr Sunu Widyatmoko, president director of Indonesia AirAsia (IAA), the local affiliate of Malaysia-based AirAsia Group, said airlines operating in South-east Asia’s largest economy feel overburdened by many inefficiencies that have weakened their competitiveness and ability to offer cheaper ticket prices compared with their regional rivals, especially those from Singapore.

“We are not operating on a level playing field,” said Mr Sunu, who has been IAA chief since July 1.

“From the cost side, we lose. We are being burdened by many factors, including taxes, airport inefficiencies and, most importantly, higher fuel prices,” he said.

Mr Sunu’s remarks came during a recent informal meeting with The Jakarta Globe, at which he was accompanied by Mr Dharmadi, who sits on IAA’s board of commissioners.

Mr Dharmadi, who served as IAA’s president director from December 2007 until he handed over the duties to Mr Sunu in July, said the cost of jet fuel in Indonesia is 12 per cent higher than that paid elsewhere by regional rivals such as Singapore.

Airlines operating in the country thus have no choice but to “squeeze” state energy giant Pertamina, which holds a monopoly on the country’s jet fuel distribution, on its terms, service conditions and high fuel prices. “That is not healthy,” said Mr Dharmadi.

Meanwhile, government officials are proceeding with plans for Indonesia to accept the open sky agreement.

Mr Hemi Pramuraharjo, a spokesperson with the aviation directorate-general at the Transport Ministry, said the government plans to open more take-off and landing slots to foreign airlines as part of the country’s commitment to implement the open sky policy under the AEC framework.

“We want to have balanced proportions. If foreign airlines cannot enter Indonesia, then the impact will be that our airlines cannot come to their countries. There is a reciprocity issue,” Mr Hemi said.

Currently, 72 per cent of flight slots in the Soekarno-Hatta airport are filled by domestic flights and the remainder by international flights, he said.

Indonesia wants to boost international flight slots to 30 per cent and reduce domestic flight slots to 70 per cent, he added. The Jakarta Globe