Jakarta Investigates Airlines for Potential Collusion Amid Rising Airfares
Indonesia’s competition watchdog, Komisi Pengawas Persaingan Usaha (KPPU), has initiated discussions with seven major local airlines as part of an investigation into the recent surge in air ticket prices, amid allegations of potential cartel-like practices. The inquiry encompasses notable carriers such as Garuda Indonesia, Citilink, Sriwijaya Air, NAM Air, Batik Air, Lion Air, and Wings Air, all summoned to provide insights into their pricing strategies, especially during the peak travel periods of Ramadan and ahead of the Hajj season.
The investigation by KPPU, as reported by Indonesia’s Tempo and detailed by aviation industry observer ch-aviation, is not an accusation of wrongdoing but rather an exploratory measure to understand the dynamics behind the fare adjustments. The focus is on the allocation of tickets across different fare buckets, with a suspicion that airlines might be reducing availability in lower-priced categories in favor of higher-priced ones, potentially in a coordinated manner.
Gopprera Panggabean, a member of KPPU, highlighted the agency’s approach to understanding whether the price hikes stem from legitimate factors such as demand spikes, fuel cost increases, exchange rate fluctuations, or other operational cost changes, versus unlawful anti-competitive behavior among the airlines. The allocation of fare buckets and any consensus among airlines to adjust these allocations is under scrutiny for compliance with Indonesia’s competition laws, particularly Articles 5 and 11 of Law Number 5 of 1999, which address unfair business practices.
Public responses from the airlines have been swift, with representatives from both the Lion Air Group and the Garuda Indonesia Group denying any anti-competitive conduct. Lion Air’s co-founder Rusdi Kirana defended the airline’s pricing structure as consistent and within regulatory bounds, inviting open dialogue for any clarifications. Similarly, Garuda Indonesia’s CEO, Irfan Setiaputra, affirmed the airline’s commitment to regulatory compliance in setting ticket prices.
This investigation echoes a previous inquiry in 2020 by KPPU, which examined similar concerns but concluded that while consumer detriment occurred due to ticketing behaviors in 2019, there was no evidence of cartel activity among the airlines. Instead, the situation was described as a form of “informal parallelism,” where airlines independently mirrored competitors’ ticketing practices without explicit coordination.
As the KPPU proceeds with caution in its current assessment, the aviation industry and travelers alike await the findings, which will shed light on the complexities of airline pricing strategies and ensure fair market practices are upheld in Indonesia’s competitive air travel sector.