Government allows airlines to raise fares as oil tops $100

The government will allow airlines to raise domestic ticket prices by up to 13% and increase jet fuel surcharges, as global oil prices surge above $100 per barrel amid the Middle East conflict.

Coordinating Minister for Economic Affairs Airlangga Hartarto said the jet fuel surcharge will rise from 10% to 38%, while base ticket prices may increase between 9% and 13%.

The government will cover the 11% value-added tax on domestic flight tickets to offset the impact on passengers, with subsidies estimated at around Rp1.3 trillion (about $76 million) per month.

The policy will be reviewed after two months, depending on developments in the Middle East conflict.

Read also: Indonesia to keep subsidized fuel prices unchanged through end-2026

Global crude oil prices have exceeded $100 per barrel following escalating tensions involving the United States, Israel, and Iran, which have disrupted supply routes including the Strait of Hormuz.

Jet fuel prices in the country have risen sharply, increasing by more than 70% for domestic flights since March, while prices for international flights have nearly doubled, according to data from Pertamina.

Despite rising energy costs, the government said it will maintain subsidies for gasoline and natural gas, which currently cover about 30% to 40% of consumer prices.

Finance Minister Purbaya Yudhi Sadewa said the state budget remains sufficient, with the fiscal deficit expected to stay around 2.9% of gross domestic product.

The country’s 2026 budget assumptions were based on oil prices of $70 per barrel, significantly below current levels.

The government also announced it will remove import duties on aircraft spare parts to help reduce airline operating costs.

Editing by Alexander Ginting