Jakarta. Indonesia’s airlines are tightening their seatbelts amid a falling rupiah, as 70% of their operational costs are paid in the greenback.

Bloomberg spot market data shows that the rupiah is trading at Rp 17,945 as of 1 p.m on Wednesday, and has even smashed through Rp 18,000 recently. 

According to the Indonesia National Air Carriers Association (INACA), airlines mainly generate their revenue in rupiahs, hence making it more difficult to pay the dollar-denominated operational costs. This includes the aviation fuel purchases, spare parts maintenance, and even flight insurance. The elevated aviation fuel prices have also set another obstacle. 

INACA secretary-general Bayu Sutanto said that airlines nowadays would focus on routes that could get the most passengers or high load factors.

“We are slashing the frequency of flights with low load factors. Airlines are preparing fuel-saving programs. They are selectively imposing fuel surcharges,” Bayu said

Indonesia has allowed airlines to impose fuel surcharges of up to 50% of the government’s upper airfare cap, depending on the service category. 

INACA is currently waiting for the government to also adjust the limit for domestic flights by jet and propeller aircraft. The current upper airfare cap was based on the US dollar exchange rate and aviation fuel prices in 2019. Aviation fuel prices were around Rp10,442 in 2019, while they have now reached Rp22,190. Rupiah was at Rp 14,136 per dollar at the time, and is now hovering at around Rp 18,000.

Airlines are also waiting for the promised zero tax on spare part imports. However, the government to this day is still having internal coordination before the tax exemption can actually take place. The Transportation Ministry has said that the zero-tax treatment should be in force soon.

Aviation analyst Gatot Rahardjo has also pushed for long-term solutions. While the aviation industry is packed with potential, the sector is prone to external factors. Gatot also feared there wouldn’t be many opportunities for airlines to achieve maximum revenue in the near future.

“Except during the Christmas and New Year holidays. Even if the school holidays are approaching, people’s purchasing power is weakening. I doubt the industry would receive that much boost unless there are incentives,” Gatot said.

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