Jakarta. Indonesia will allocate Rp 722 billion ($39.9 million) to cover value-added tax (VAT) on domestic economy-class airline tickets during the 2026/2027 Christmas and New Year holiday period, as the government rolls out travel discounts to support household purchasing power.

Chief Economic Affairs Minister Airlangga Hartarto said the government had prepared around Rp 31.8 trillion for year-end stimulus measures, including food assistance, wage subsidies and holiday travel discounts.

“The Christmas and New Year discounts have all been prepared, with funding of around Rp 31.8 trillion,” Airlangga said after a cabinet meeting at the presidential palace in Jakarta on Oct. 21, according to Antara.

The flight ticket incentive will cover 100% of the VAT payable on base fares and fuel surcharges for eligible domestic economy-class flights. Under Finance Ministry Regulation No. 77/2026, tickets must be purchased between Oct. 20, 2026, and Jan. 10, 2027, for flights scheduled from Dec. 22, 2026, to Jan. 10, 2027.

The government expects the tax relief to benefit around 3.7 million passengers.

Transport Minister Dudy Purwagandhi said the broader holiday discount program was intended to make travel more affordable while supporting transportation, tourism, and economic activity during the year-end peak season.

Other incentives include a 30% discount on train fares from Dec. 22 to Jan. 4, a 30% reduction in the base fares of passenger ships from Dec. 17 to Jan. 10, and the waiving of port service charges for ferry passengers from Dec. 22 to Jan. 10. The measures have a combined allocation of Rp 161.4 billion and target 2.8 million passengers, Dudy said.

Indonesia AirAsia said passengers could see domestic ticket prices fall by at least 12% during the holiday period, supported by the VAT incentive and a 50% reduction in passenger service charges (PSC), which cover airport passenger services.

However, the airport charge discount has raised concerns about its impact on airport operators' finances.

Aviation analyst Gerry Soejatman warned that cutting PSC revenue by half during the peak travel season could hurt airport operators, which typically rely on higher passenger volumes to boost earnings.

"The impact could extend beyond passenger services to non-aeronautical revenue, including parking fees and rental income from shops and offices," he told Investor Daily.

Gerry argued that airlines would benefit more sustainably from an adjustment to the government's upper limit on domestic airfares, which he said had not kept pace with inflation since its introduction in 2010.

The cap limits airlines' ability to pass on rising operating costs, potentially discouraging them from adding capacity during both peak and off-peak periods. This can contribute to limited seat availability during busy holidays and relatively expensive tickets during quieter periods, he said.

The government expects the year-end stimulus package to sustain consumer spending amid global economic uncertainty, while the aviation industry faces the challenge of balancing affordable fares with financial sustainability.

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