Indonesia allows airlines to raise fuel surcharges as aviation costs soar 70%

JAKARTA, Indonesia (MNTV) – Indonesia will allow airlines to raise fuel surcharges by as much as 38% to cushion the impact of soaring aviation fuel costs triggered by the US-Israeli war on Iran, as carriers face a roughly 70% surge in jet fuel prices.

Aviation turbine fuel in Indonesia has climbed to around 23,000 rupiah ($1.73) per litre, significantly increasing operating costs for airlines, for which fuel accounts for roughly 40% of total expenses.

The government is also capping any increase in ticket prices at around 13% and will absorb the 11% value-added tax on economy-class commercial flights to limit the burden on passengers.

Coordinating Minister for Economic Affairs Airlangga Hartarto said the fuel surcharge adjustment will remain in place for two months and be reviewed periodically based on global oil and aviation fuel price developments.

The government is also allowing airlines flexibility in payments to state-owned fuel producer Pertamina, and will eliminate import duties on aircraft spare parts to help lower maintenance and operational costs.

As a net oil importer and South-east Asia’s largest economy, Indonesia is particularly exposed to global energy price swings.

The government and Pertamina have agreed to keep subsidized fuel prices unchanged for now, with Finance Minister Purbaya Yudhi Sadewa saying the state budget deficit remains projected at around 2.9% of GDP.

Airlangga said Indonesia could maintain current subsidized fuel prices through the year as long as average global oil prices remain below $97 per barrel. The policy follows the government’s introduction last week of a work-from-home directive aimed at reducing fuel consumption.