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In the Line of Duty

Indonesian Airlines Call on Government to Make Aircraft Spare Parts Duty Free

(11/15/2013) The Indonesian Air Carriers Association (INACA) is calling on the government to eliminate import duties for aircraft spare parts in order to make Indonesian airlines more competitive internationally reduce the need for foreign maintenance and repair services 

The chairman of INACA, Arif Wibowo, said that spare parts for aircrafts must all be imported. Therefore, in order to make Indonesian air carriers more competitive in the face of coming “open sky” rules, government support is needed to reduce the high cost of import duties for aircraft spare parts.

As reported by Bisnis.com, Wibowo, speaking at the office of the Minister of Industry on Monday November 11, 2013, said competing nations such as Malaysia and Singapore do not charge import duties on aircraft spare parts. Meanwhile, in Indonesia the customs duties for these items ranges between 5-7%.

Saying some 300 different aircraft components are currently imported to Indonesia, Wibowo said suggested the INACA members would be happy if as an initial step if the current list of items being charged duties could be reduced to 200 items.

“We do not hope for too much, perhaps the initial list (of dutiable spare parts) could be reduced to 200. The Minister of Industry, Mr. Hidayat, was positive in listening to our request to assist the national airline industry," said Wibowo.

Wibowo said that the cost of spare parts comprise an average 15% of the total cost of an airline. Thus, if 5% custom’s duties were eliminated this would have a major effect on reducing airline operating costs.

“If (these duties) we eliminated, the competiveness of the Indonesian air transportation industry would be enhanced,” said Wibowo.

Meanwhile, the CEO of Garuda Indonesia, Emirsyah Satar has lent his support to INACA’s call for the lowering or import taxes on aircraft spare parts. Satar said it is unfortunate that aircraft maintenance has to be done abroad. “There (overseas) there is not import duty (on spare parts), while if the work is done in Indonesia import duties apply. This is what was discussed with the Minister of Industry in order that funds don’t run abroad and so that Indonesian airlines can be competitive,” he explained.

The Director General of Industry for High Tech Businesses, Budi Darmadi, said his office would consider the request to reduce or eliminate duties of aircraft spare parts,

He said that those spare parts for which no domestic alternative part exists are those for which a reduction in duty could be considered, but in those cases in which spare parts are produced domestically no reduction in the import tariff can be entertained by the government.