Indonesia Caps Airfare Hikes as Avtur Prices Skyrocket 70% Amid Middle East Tensions

JAKARTA, Investortrust.id — Indonesia is launching a multi-billion rupiah rescue package for its aviation industry as jet fuel prices explode, threatening to grounded the nation’s post-pandemic travel recovery. Coordinating Minister for Economic Affairs Airlangga Hartarto announced Monday that the state will spend Rp 2.6 trillion ($163.5 million) over the next two months to subsidize economy-class airfares and keep price hikes capped under 13%.

For investors in Southeast Asian aviation, Jakarta’s aggressive intervention is a double-edged sword. While it provides a critical lifeline for carriers like PT Garuda Indonesia (Persero) Tbk (GIAA) and Lion Air, it highlights the extreme vulnerability of the archipelago's connectivity to global energy shocks. By zeroing out import duties on spare parts and absorbing tax costs, Indonesia is attempting to prevent a "death spiral" of high fares and low demand, though the fiscal burden of these subsidies will be closely watched.

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The Avtur Shockwave

The primary driver of the crisis is a vertical spike in fuel costs. As of April 1, 2026, avtur prices at Soekarno-Hatta (CGK) hit Rp 23,551 ($1.48) per liter—a 72% jump from the previous month. The Indonesia National Air Carriers Association (INACA) had previously sounded the alarm, noting that fuel now accounts for a staggering 40% of total airline operating expenses.

To mitigate this, Minister Airlangga confirmed that fuel surcharges—previously capped at 10% for jets—will be harmonized at 38% across the board. "If we do not adjust, other airlines could exploit the price differences," Airlangga stated on Monday, noting that fuel prices in neighboring Thailand and the Philippines have hit even higher levels of $1.85 and $1.59 per liter, respectively.

Fortifying the Flag Carrier

The government is moving with particular urgency to "shield" Garuda Indonesia, the national flag carrier. Dony Oskaria, Head of the BUMN (State-Owned Enterprise) Management Agency and COO of Danantara—the country’s multi-billion dollar sovereign wealth fund—met with the Ministry of Transportation on Monday to coordinate a defense for the airline’s balance sheet.

The strategy focuses on "operational efficiency without burdening the public," according to Dony. Central to this is the new 0% import duty on aircraft components, a move that reverses a previous tax burden that cost the industry roughly Rp 500 billion ($31.4 million) annually. This policy pivot is designed to ensure Garuda remains competitive even as global supply chains for parts remain strained.

Tactical Relief and Evaluation

The current subsidy program is slated for an initial two-month run, after which Jakarta will re-evaluate based on the volatility in the Persian Gulf. During this window, state energy firm Pertamina has also been directed to offer "business-to-business" payment relaxations for domestic airlines struggling with liquidity.

"The government understands the dynamics faced by the national aviation industry," said Lukman F. Laisa, Director General of Civil Aviation. He emphasized that every decision, including the potential adjustment of the "Upper Limit Price" (TBA), is being weighed against the purchasing power of the Indonesian middle class and the absolute necessity of maintaining national connectivity.