Indonesia to scrap fuel surcharge on flights with new price cap

Indonesia's Ministry of Transportation has announced that the controversial fuel surcharge on domestic airline tickets will be eliminated once a revised upper price limit (TBA) for flights is officially enacted. Minister of Transportation Budi Karya Sumadi stated that the TBA is designed to encompass various operational costs for airlines, including the fuel surcharge, which is currently applied under specific conditions.

"Regarding the TBA for aircraft, the TBA contains the cost components of the airlines, such as operational costs, and includes the fuel surcharge. If the TBA is later implemented, then the fuel surcharge will be abolished," Sumadi explained in Jakarta on Sunday.

The adjustment is deemed necessary because the current TBA was established in 2019, a period with significantly different rupiah exchange rates and jet fuel prices compared to the present economic climate. These economic shifts have altered the operational cost structure for airlines, making a revision of the domestic flight upper tariff components essential.

Airline companies had previously proposed adjustments to the fuel surcharge, citing the dynamic nature of jet fuel prices as a reason for its effectiveness in meeting operational needs. However, the government has focused on the implementation of the current fuel surcharge as a temporary measure. Sumadi emphasized that the upcoming TBA will incorporate current operational costs, rendering the separate fuel surcharge unnecessary.

The Ministry is closely monitoring global oil price trends as a key indicator influencing the operational costs of the national aviation industry. If jet fuel prices return to levels seen before the increase in April, the government intends to promptly implement the new TBA as the basis for domestic ticket pricing. The government had already formulated a new TBA, planned for implementation after global jet fuel prices and geopolitical conditions stabilize.

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Regarding the TBA for aircraft, the TBA contains the cost components of the airlines, such as operational costs, and includes the fuel surcharge. If the TBA is later implemented, then the fuel surcharge will be abolished.