Indonesia announced on Monday a 28-percentage point rise in the surcharge on jet fuel, and said it will allow airlines to raise the domestic ticket price, which the government caps, by up to 13 percent.
As global oil prices soar on the back of the Middle East war, Economy Minister Airlangga Hartarto told reporters the jet fuel surcharge would rise from 10 to 38 percent, and the base ticket price between nine and 13 percent.
Southeast Asia’s largest low-cost carrier AirAsia X said Monday it, too, was raising ticket prices and cutting routes to cushion the impact of the war on Iran.
In Jakarta, Airlangga said the government would bear the 11-percent value added tax on domestic flight tickets to offset the impact of the price rise on travellers.
“The amount of subsidy given by the government is around 1.3 trillion rupiah (about $76 million) per month,” the minister said.
The measures would be reevaluated after two months, he added, depending on whether “the war in the Middle East continues”.
Global crude prices have soared to more than $100 per barrel since the United States and Israel unleashed a series of strikes on Iran on February 28, sparking a region-wide conflict and the effective closure of the crucial Strait of Hormuz.
At Jakarta’s Soekarno-Hatta International Airport, the price of jet fuel for domestic flights has increased more than 70 percent since March, according to the website of state oil company Pertamina.
For international flights, the price has nearly doubled.
The government insisted Monday it would not cut its subsidy on domestically-consumed gasoline and natural gas, however.
The subsidy covers about 30 to 40 percent of the cost for consumers and consumes a large chunk of the annual budget in Southeast Asia’s most populous nation.
Jakarta’s 2026 fuel subsidy calculation was premised on a global oil price of $70 per barrel, and the government is legally required to keep the fiscal deficit at no more than 3.0 percent of GDP.
“With savings here and there, we can ensure that the deficit will still be around 2.9 percent,” Finance Minister Purbaya Yudhi Sadewa said at the same news conference Monday.
“I want to emphasise that the subsidised fuel price will not be raised until the end of the year. And my budget is adequate.”
Airlangga also announced the government would eliminate the import duty on aircraft spare parts in a bid to lower airline operational costs.
Jakarta last month announced fuel rationing and mandated work from home for civil servants as it seeks to conserve energy stocks.
Several Asian airlines have raised their fuel surcharges, and many worldwide have upped fares to reflect the increase in jet fuel prices.
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