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Indonesian govt caps airfare increases at 9–13 percent

Jakarta (ANTARA) – The Indonesian government has stated that it will keep the domestic airfare increases in the range of 9 to 13 percent in response to rising aviation fuel prices triggered by tensions in the Middle East.”To keep domestic airfares affordable for the public, the government is capping price increases within a range of 9 to 13 percent,” Coordinating Minister for Economic Affairs Airlangga Hartarto said during a press conference in Jakarta on Monday.The government has prepared several mechanisms to curb these price hikes. First, the government will provide a tax incentive in the form of a government-borne value-added tax of 11 percent for economy-class tickets.”Based on these calculations, the government is providing approximately Rp1.3 trillion (approximately US$76.3 million) in subsidies per month. Therefore, for two months, the total will reach Rp2.6 trillion,” he said.This policy will be implemented for two months and will be further evaluated based on the developments of the geopolitical situation in the Middle East.The second mechanism involves a zero-percent import duty incentive for aircraft spare parts, which, according to Hartarto, is expected to reduce the operational costs of airlines.The incentives are estimated to boost economic activity by approximately US$700 million per year, increase the contribution to the gross domestic product by US$1.49 billion, and create around 1,000 direct jobs.Furthermore, the government has adjusted the ceiling for fuel surcharges to 38 percent for all types of aircraft, including both jet and propeller aircraft, in coordination with all airlines operating in the country.Previously, the fuel surcharge limit was set at 10 percent for jets and 25 percent for propeller aircraft. Under the new policy, the ceiling for jets will rise by 28 percentage points, while the rate for propeller aircraft will increase by 13 percentage points.As of April 6, the price of aviation fuel in Indonesia is recorded at Rp23,551 (approximately US$1.38) per liter.