Sat, Feb 16, 2019 - Page 10 News List

Indonesia’s Garuda cuts flight prices

Reuters, JAKARTA

State-owned airline Garuda Indonesia has slashed ticket prices by 20 percent, the company said on Thursday, 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, Sriwijaja 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 officer 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 percent on the news, underperforming the broader market.

Indonesian 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.

However, analysts said that 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.

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.

One of Lion’s Boeing Co 737 MAX jets crashed in October last year, killing 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.

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