Indonesia Faces Rising Airfare Pressures as Airline Costs Soar

Indonesia’s Transportation Ministry is grappling with mounting cost pressures in the aviation sector, sparking a reevaluation of airline ticket pricing regulations that could result in higher fares for passengers. Despite long-standing government efforts to maintain affordable air travel, officials and industry leaders warn that operational challenges and economic factors may force a shift in policy, potentially impacting millions of domestic travelers across the archipelago.

Cost Pressures Mount for Airlines

The aviation industry in Indonesia, a critical lifeline for connectivity in a nation of over 17,000 islands, is facing unprecedented financial strain. Lukman F. Laisa, the civil aviation director general at the Transportation Ministry, recently addressed lawmakers on the House of Representatives Commission V, highlighting the key drivers behind the rising costs. He pointed to disruptions in the global spare parts supply chain, escalating maintenance expenses, and challenges with engine-related contracts as major contributors. Additionally, the weakening of the Indonesian rupiah against the US dollar has compounded these issues, making imported parts and fuel more expensive for local carriers.

“There are disruptions in the global spare parts ecosystem, such as engine-related difficulties, rising contract costs and a weakening rupiah exchange rate against the United States dollar” said Lukman, underscoring the scale of the challenge. He also noted that many aircraft, grounded during the sharp decline in travel demand caused by the COVID-19 pandemic, now require significant investment to be reactivated, further straining airline budgets.

Garuda Indonesia, the nation’s flag carrier, echoed these concerns during the same meeting. President Director Wamildan Tsani Panjaitan detailed how operational costs have surged since 2019, while fare caps have remained static. He highlighted the rising price of aviation turbine fuel and maintenance, alongside a depreciating rupiah, as critical factors eroding profitability. “This is certainly weighing on airlines because a decrease in load factor or passenger occupancy by 3 to 5 percentage points affects airlines’ margins and profitability greatly” said Wamildan, illustrating the tight margins under which carriers operate.

As an example, Wamildan cited the cost of a single flight from Jakarta to Bali, a popular domestic route. In 2019, the cost per flight was approximately 194 million Indonesian Rupiah (US$11,876). By 2025, this figure has risen by 38 percent to 269 million Rupiah (US$16,465), driven by increases in maintenance, repair, and overhaul (MRO) expenses, as well as fuel costs. While some relief has come through restructured leasing debts post-COVID-19, additional pressures such as a 35 percent rise in minimum wages for airline workers since 2019 have offset these gains.

Proposed Changes to Fare Regulations

In response to these challenges, the Transportation Ministry is proposing several revisions to existing regulations, including Transportation Ministerial Regulation No. 20/2019 on domestic airfares and Ministerial Decree No. 106/2019 on fare ceiling prices. Among the suggested changes is a new fare calculation formula that factors in travel time, alongside revised upper and lower fare limits. Lukman emphasized the need to adjust pricing for economy class tickets on short-distance routes, which are often the most accessible option for budget-conscious travelers.

Another key proposal involves limiting fare differentiation across service categories—full-service, medium, and low-cost carriers (LCC)—to jet-powered aircraft only. Currently, these differentiations also apply to propeller-driven aircraft, which are commonly used for regional travel to remote and underserved areas. Lukman argued that this adjustment could streamline pricing structures and better reflect operational realities. He also advocated for updated fare caps to prevent predatory pricing while enhancing business competitiveness and protecting consumers from drastic price fluctuations between low and high travel seasons.

“Lastly, adjusting upper and lower fare caps to avoid predatory pricing and to improve business competitiveness” said Lukman, stressing the importance of balancing airline viability with consumer affordability. If implemented, these changes could mark a significant departure from the government’s historical focus on keeping air travel accessible, particularly for lower-income passengers who rely on domestic flights to connect with family or access economic opportunities.

Broader Economic Implications

The potential rise in airfares comes at a time when Indonesia’s economy is still recovering from the long-term impacts of the COVID-19 pandemic. Air travel, a cornerstone of economic activity in a geographically fragmented nation, plays a vital role in tourism, business, and regional development. Destinations like Bali, which rely heavily on domestic tourists alongside international visitors, could see reduced demand if fares become prohibitive for the average traveler. The cost of a Jakarta-to-Bali flight, already up significantly since 2019, serves as a stark reminder of how quickly operational expenses can translate into higher prices at the ticket counter.

Moreover, the weakening rupiah—a persistent challenge for Indonesia’s import-dependent industries—exacerbates the situation. With much of the aviation sector’s costs tied to US dollar-denominated expenses like fuel and spare parts, currency fluctuations directly impact airline balance sheets. For passengers, this could mean not only higher base fares but also increased surcharges, as carriers pass on a portion of their costs to consumers.

Beyond the immediate impact on travelers, the proposed regulatory changes could have ripple effects across the broader economy. Higher airfares might dampen domestic tourism, a key driver of growth in regions like Java, Kalimantan, and Sulawesi, where small businesses depend on visitor spending. At the same time, airlines argue that without fare adjustments, their ability to maintain safety standards, invest in fleet modernization, and expand routes to underserved areas could be compromised. This delicate balance between affordability and sustainability lies at the heart of the ongoing policy debate.

Industry and Public Reactions

Garuda Indonesia’s leadership has been vocal about the need for updated fare caps, arguing that the current limits, unchanged since 2019, fail to reflect the economic realities of 2025. Wamildan’s comments during the Commission V meeting underscored the urgency of reform, with the airline warning that continued financial pressure could jeopardize service quality and route availability. For Garuda, which has faced its own share of financial difficulties in recent years, including debt restructuring, higher fares could provide a much-needed lifeline.

However, public sentiment on potential fare hikes appears mixed. While some travelers acknowledge the challenges facing airlines, others worry about the burden of higher costs. Domestic air travel is often the only practical option for inter-island journeys, given the time and logistical constraints of sea or land transport. For many Indonesians, especially those in remote areas, a rise in ticket prices could limit access to essential services, family connections, and economic opportunities in urban centers like Jakarta or Surabaya.

Analysts also caution that any fare increases must be accompanied by transparency and consumer protections to avoid alienating the public. If fares rise without corresponding improvements in service or reliability, airlines risk losing trust among passengers already frustrated by delays, cancellations, and hidden fees. The Transportation Ministry’s challenge will be to craft policies that address airline needs while safeguarding the interests of the traveling public.

Looking Ahead

As the Transportation Ministry finalizes its evaluation of airline ticket pricing, the coming months will be critical for Indonesia’s aviation sector. The proposed regulatory changes, if enacted, could reshape the landscape of domestic air travel, with far-reaching implications for passengers, businesses, and regional connectivity. While airlines like Garuda Indonesia push for fare adjustments to offset soaring costs, the government faces the difficult task of balancing industry sustainability with affordability for millions of Indonesians.

For now, questions remain about how these reforms will unfold and whether they can strike a fair compromise. As policymakers, carriers, and the public weigh in, the future of air travel in Indonesia hangs in a delicate balance, with economic and social stakes that extend far beyond the runway.