Turbulence in the Tropics: Indonesian Carriers Seek 15% Fare Hike as Costs Soar

JAKARTA, Investortrust.id — Indonesia’s domestic airlines, the vital arteries connecting the world’s largest archipelago, are pleading for a financial lifeline as a "perfect storm" of geopolitical strife and currency devaluation threatens to ground their recovery.

The Indonesia National Air Carriers Association (INACA) has formally requested that the government authorize a 15% hike in the the state-mandated ceiling for domestic airfares, known locally as TBA, and a corresponding 15% increase in fuel surcharges for both jet and propeller aircraft. The plea, issued Wednesday, March 25, 2026, comes as the industry grapples with a global oil surge and a Rupiah that has breached the psychologically significant level of Rp 17,000 to the U.S. dollar (approx. $1.00).

This fiscal turbulence matters far beyond the balance sheets of Jakarta-based carriers. In a nation of over 17,000 islands, aviation is not a luxury but a critical infrastructure. If the government refuses the hike, carriers warn that national connectivity and safety standards could be compromised; if they grant it, they risk stoking inflation and alienating a price-sensitive middle class that relies on affordable travel for commerce and family ties.

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A Currency and Commodity Vise

The industry’s math has become increasingly unsustainable. INACA Secretary General Bayu Sutanto noted that while airline revenues are collected in Rupiah, roughly 70% of their costs—including fuel, aircraft leases, and spare parts—are billed in greenbacks. The Rupiah has slid more than 20% from its 2019 average of Rp 14,136, significantly inflating the cost of doing business.

Simultaneously, the price of "avtur" (aviation turbine fuel) has become a volatile moving target. Domestically, prices have climbed from Rp 10,442 per liter in 2019 to as high as Rp 15,500 ($3.48 per gallon) this month. Globally, jet fuel has jumped from $70 to $110 per gallon over the same period, a 57% increase driven largely by escalating conflict in the Middle East.

"There is a high probability that avtur prices will rise again on April 1, following market trends dictated by the geopolitical crisis," Bayu said. He added that the conflict is also forcing international flights to take circuitous, fuel-heavy routes to avoid war zones, while simultaneously dampening demand for lucrative Umrah pilgrimage routes to the Middle East.

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Supply Chain Stutters

Beyond fuel, the industry is fighting a war of attrition with its supply chain. The time required to source critical engine and airframe components has ballooned from a few days to over a week, with shipping costs rising in tandem.

To weather the crisis, INACA is proposing more than just fare hikes. They are seeking a temporary stimulus package that includes the suspension of Value Added Tax (VAT/PPN) on jet fuel and domestic tickets, as well as the rescheduling of payments for airport and navigation fees.

The Government’s Delicate Balancing Act

The Ministry of Transportation is treading carefully. While acknowledging the headwinds, Lukman F. Laisa, Director General of Civil Aviation, emphasized that any policy change must weigh airline "economics" against "public purchasing power."

"The government considers various aspects, including the sustainability of the aviation industry and the protection of consumers," Lukman said in a statement Wednesday. He noted that the Ministry is coordinating with airport operators and state energy giant Pertamina to monitor the situation, but cautioned that any stimulus would need to align with the country's broader fiscal health.

As the April 1 deadline for new fuel pricing nears, the Indonesian government finds itself caught between the necessity of keeping its airlines aloft and the political peril of making air travel unaffordable for the masses.

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