The Government has agreed to a temporary increase in domestic airfares requested by the Indonesian National Air Carrier Association (INACA).
The increase was made necessary for Indonesian airlines to cover the cost of aviation fuel and compensate for the declining value of the Indonesian Rupiah against the U.S. dollar.
The Ministry of Transportation approved a passenger surcharge amounting to Rp. 60,000 (US$4.90) per hour flown on a jet and Rp. 50,000 (US$4.10) per hour on propeller-driven aircraft.
According to NusaBali, a spokesman for the Transportation Ministry said the increase is temporary and will reviewed in relation to changing market conditions and rates of exchange.
INACA members have complained to the Government that current air fares tied to an old exchange rate of Rp. 10,000 to one US$1 was causing continuing losses to airlines working with an exchange rate that is now around Rp. 12,200 to US$1.
Airlines buy their fuels at rates linked to an international market price tied to the U.S. dollar.
For many Indonesian airlines, the costs of chartering aircraft, maintenance and the wages of foreign pilots are all costs equated in U.S. dollars.
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