Garuda Indonesia Lowers Fares At Request Of Indonesian President

Filed Under: Garuda Indonesia

You’ve gotta love some good election year meddling from the government…

Garuda Indonesia has announced that they’ll be cutting domestic ticket prices by 20%. This follows a request from Indonesian president Joko Widodo, who asked the airline to cut fares to help the hospitality industry improve their occupancy rates.

Also worth noting, but I’m sure completely unrelated, is that the president is up for re-election in April, just a couple of months from now. 😉

These ticket price reductions apply for flights on Garuda Indonesia, Citilink Indonesia, Sriwijaya Air, and NAM Air.

Garuda Indonesia’s CEO had the following to say regarding the fare reductions:

“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.”

Rather conveniently, Garuda Indonesia’s CEO also suggests that the 20% reduction in ticket prices won’t impact the airline’s income, as this move will increase ticket numbers. If the correlation is that direct, you’d think they may have reduced prices a bit earlier.

Indonesia has seen a huge spike in the number of people traveling. The reason I find this outcry a bit misguided on the surface is that there’s actually a fair bit of competition within the country, as both Lion Air and AirAsia have a significant presence there, and their fares are generally quite low. So it’s not like consumers don’t have choice.

Then again, as much as I love the frontline employees, I’ve never really understood Garuda Indonesia’s management team. Last September they sacked the previous CEO, who was improving things at the airline, and replaced him with the CEO of another state owned company. The new CEO’s priority?

“The leadership must face the turbulent economic conditions, starting from the depreciated rupiah to rising oil prices. The main focus of the new management is … an increase in employee happiness. Because making the employees happy will improve customer service.”

An interesting airline indeed!

Comments

  1. Hi Lucky! Hello from Indonesia! I’m really happy that you featured some aviation news from our country! 🙂

    You were right about competition – here we have a lot of airlines in LCC category, such as Citilink (which is owned by Garuda Indonesia), Lion Air and AirAsia. And then we have FSCs, such as Garuda Indonesia and Batik Air (which is part of Lion Group). We also have some airlines that fall in the middle between FSC and LCC such as Sriwijaya and NAM Air, both recently merged into Garuda Indonesia group.

    Recently, the government revoked an old regulation back in 2015, which ordered all LCC to provide free baggage facilities for all domestic flights. This sparked a lot of debates, especially from passengers of the LCC since they are more sensitive to price changes – and due to lack of socialisation from the carriers, they don’t know about the paid baggage and in the end, they have to pay a lot of money to check in their baggage. In addition to low safety record and on-time performance, a lot of Indonesians (including me) avoid flying Lion Air these days.

    How about AirAsia? Even though AirAsia has significant presence here, it only covers major cities in Java and Bali island, and as a gateway to bigger Southeast Asia region due to their extensive ASEAN presence. However, their domestic coverage is very limited – which is why it’s not on head-to-head competition with Lion Air, or even Garuda Indonesia.

    Other than Lion Air, Garuda is the only carrier group with the best network for domestic travel. They own Citilink which connect major cities to routes not covered by other airlines, in addition to their recent operational takeover of Sriwijaya Air and NAM Air. And as a state owned company, it’s obliged to follow government orders.

    For your information, in the time being they’re not offering fares other than economy flexible (Y class) on some routes. Usually they offer classes that don’t even entitled for mileage accrual, but nowadays they aren’t – and domestic ticket fare has been doubled (or even tripled on some routes).

  2. Garuda Indonesia is being run like a socialist country, before we know it, they’ll be in more financial trouble and have to cut more and more routes.

  3. I always try to imagine what other reason is behind this. Perhaps this is in preparation for the grounding of LionAir so as to not let fares go so high it hampers mobility across Indonesia.

    I say this as today there was another accident with LionAir. A 737-800 overran the runway and looks to be a complete write-off. No fatalities (thank god). But this is getting to be too much.

  4. High air tickets, more cancelled schedules,empty aiports, no local tourist visiting tourism destination,slower economy result in.
    It began with duopoly player by consololidation and Garuda group raised ticket price and follows by Lion Group. No wonder Jokowi have to step in regulate ticket ptice

  5. They also just cut fuel prices for road travel, by subsidicing it more.
    Strangely also just weeks before the election 😉

    It would be called corruption elswere

  6. Ben, your story did not tell much detail about what’s going on in Indonesia Aviation. Here’s the detail who lead your story
    1. It all start in January 2019 when both Lion group and Garuda Indonesia group ask DGCA to raise lower limit fare and upper limit fare (Indonesia domestic airline fare are subject of government regulation). So DGCA simply raise he ticket price, and the price double (in some cases tripled). For example a ticket from CGK-BWX in November 2018 is 500-700K Rupiah, in January 2019 the price is 800-1500K, which is ridiculous
    2. In the same time, Lion Air also ask permission to DGCA to enforce baggage fee (previous regulation stipulated that LCC who fly domestic must provide free baggage 15 Kg). So DGCA grant it, and with the ticket price already raise, the price of JT trip by somewhat more expansive than GA (even without baggage). Citilink also want to enforce baggage fee, but it decide to delay it at request of DGCA, after see much negative reaction about this policy
    3. Right now Indonesia heading to duopoly airline (like Japan with JAL and ANA), after Garuda Indonesia manage to take over operational control Sriwijaya group (Sriwijaya and NAM air) which lead take over. Even Garuda Indonesia are rumored to take over Indonesia AirAsia and Indonesia AirAsia X. So no wonder the price are high as the result of shrinking airline industry.
    4. After much negativity of the price hike and etc, the Government decide to step in to combat the high price. They started to lower price limit in certain route, ask Garuda Indonesia group to cut the price 20% (which you tell in the story), and say to people that this hike price were caused by low season. They also want to enforce baggage fee price limit, ask Pertamina (the only suplier of airline fuel in Indonesia Airport) to cut the price by recalculate the price with global market, and even try to lure private company to start business in airline fuel (BP group already interested to enter it)

    Interestingly, this policy cause positive reaction in both GA and JT group. Garuda are expected to back to profit this year

  7. Mark – No it wouldn’t… Can you name a single country where the ruling government doesn’t announce catchy policies in the lead up to the next election?

  8. Callum – They are buying votes by reducing sirline tickets (ie). For government owned group that already is highly subsidiced. In EU, for example, its not allowed by law. Private companies cant compete with that and go bust.
    So the whole EU and other non-EU countries that are connected to the market are some examples where this would not be allowed.
    So if they wanted to reduce fares, they’d lower landing fees, fuel tax etc etc, and it would apply to all equaly.
    Thats the difference

  9. Is AirAsia a success only in Malaysia and Thailand? I have never heard of any aggressive expansion in Indonesia, the Philippines or India. Lion, Cebu Pacific and IndiGo have the lion’s share of the LCC market, and AirAsia struggles in those countries, but in Thailand, Nok Air and Thai Lion have never been able to get the better of AirAsia.

  10. Lucky, you’d after this article, I think it’d be better if you stay focused on writing trip reports. I’m also from Indonesia and I for one think that there’s something really sketchy going on between the two major airlines (Garuda and Lion). Around the end of last year, prices for most domestic tickets increased by 150%, and so after these 20% reduction, we’re still looking at double the price of a few months ago. Just to give some perspective, it costs $400 to fly round-trip from Jakarta to Manado (a 3:20 flight) after the 20% reduction now on Garuda or Batik (owned by Lion Group). Compare that to the regularly available $600-700 flights on MEA going to Europe, then you can start seeing that something is still very wrong.

    Most people here don’t see this as a political move, since people would expect the government to do something about the illogical fares.

    I find it amazing when foreigners become so ignorant as to jumping into conclusions so quickly.

  11. Kevin,

    Greetings from Bali!

    I think this “price cut” move is indeed politically motivated. It’s a set up all along to frame the current administration as being “sensitive” to the needs and aspirations of the people in an election year while in reality it was the same administration who brokered the takeover of independent Sriwijaya Air by Garuda-owned Citilink to clear the way for a duopoly of LionAir/Garuda in the domestic Indonesian market. People don’t seem to realize that it is the LionAir Group that’s pulling all the strings in the Indonesian aviation market, stifling competition thru political connection making attempts to secure approvals for new domestic routes almost impossible for any other airlines besides the Garuda/LionAir affiliated airlines

  12. Correct spelling is Sriwijaya, not Sriwijaja.

    Regarding where to buy domestic tickets, all these airlines have fully functional english websites. It’s no different than buying tickets from american carriers.

  13. Why don’t these price reductions apply to International flights. We visit Bali twice a year from Sydney plus Australians in gerneral were the highest visitors to Bali for years and yet only Air Asia and Jetstar offer cheap flights. Is it perhaps we don’t get a vote in the upcoming elections?

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