Minister of Transportation Budi Karya Sumadi asks domestic airlines to collaborate with foreign investors to expand their fleets and reduce the current monopoly in Indonesia’s aviation industry, particularly by the Lion Air Group.
Lion Air Group currently controls 60 percent of the total aircraft operating on domestic routes, a situation Budi views as problematic for healthy competition.
“We are not allowing the monopoly in eastern Indonesia to persist. A monopoly will ultimately harm the market,” Budi said on Tuesday, October 1, 2024.
To counter this, he has directed local airlines to establish joint ventures with foreign partners, potentially from countries like the United Arab Emirates, China, or Taiwan.
Such partnerships could bring in fresh capital, enabling the expansion of routes, especially to eastern Indonesia, where air connectivity is limited.
Budi revealed that some foreign airlines, including Etihad Airways and Emirates Airline, are already exploring opportunities to operate domestic flights in Indonesia.
“The President has approved the collaboration between local and foreign airlines, which will help increase the number of aircraft. This step will eventually address issues like the lack of flight routes and high ticket prices at certain airports,” he said.
The Indonesian Business Competition Supervisory Commission (KPPU) had previously summoned seven airlines − PT Batik Air Indonesia, PT Garuda Indonesia, PT Citilink Indonesia, PT Lion Air, PT Wings Air Abadi, PT Sriwijaya Air, and PT NAM Air − over allegations of monopolistic practices and high ticket prices.
Between March 26 and April 2, 2024, KPPU conducted hearings with the airlines and requested documentation on their pricing policies from September 18, 2021, to September 18, 2023.
KPPU Commissioner Gopprera Panggabean said that rising ticket prices could be attributed to various factors, including higher aviation fuel costs, increased demand, currency fluctuations, and rising aircraft component costs.
However, he suspected that monopolistic practices might also be contributing to the price hikes.
The investigation is in line with a 2019 KPPU ruling, which was upheld by the Supreme Court last year, accusing the airlines of engaging in monopolistic behavior between 2017 and 2019. Of the six airlines that complied with KPPU’s summonses, only four provided the requested documents.
