ISSN 2355-4721 Domestic Air Transport Regulations in

Domestic Air Transport Regulations in Indonesia

Kemis Martono Sandriana Marina Aditya Wardana University of Tarumanagara STMT Trisakti STMT Trisakti [email protected] [email protected] [email protected]

ABSTRACT

The purpose of this study is to explore the implementation of provisions of the domestic air transport regulations provided in the 2009 Civil Aviation Act. The method is a library research that study the scheduled air transportation including the requirement of the establishment of ; capital of air transport business entities, aircraft ownership and operation requirements, share holder composition, bank guarantee requirements, aviation human resources; tarif’s regulations including passenger’s tariff, passengers’ protection, best practices; non-scheduled air transportation; general aviation and air transportation pioneer has been fully implemented and compliances with the airlines. It is concluded that the provision of air transport regulation provided in the Civil Aviation Act of 2009 has been fully implemented and compliances with the airlines in Indonesia.

Keywords: Civil Aviation Act of 2009, scheduled and non-scheduled, pioneer air transport, general aviation.

Jurnal Manajemen Transportasi & Logistik (JMTranslog) - Vol. 03 No. 1, Maret 2016 1 Kemis Martono, Sandriana Marina, Aditya Wardana ISSN 2355-4721

INTRODUCTION There are 21 scheduled airlines and 45 non-scheduled airlines registered and The Republic of Indonesia (ROI) is operated in Indonesia main international a large archipelago country with more than carrier. operates 81 17,000 islands and airspace spanning 5,500 aircraft to serve international and domestic km from east to west and 2,430 km from routes. Recognizing the increasing north to south, covering the earth’s equator, performance at the international level, air transport links are therefore vital for Garuda Indonesia was named “The World’s Indonesia economy. Air transport services Most Improved ” in 2010, followed are aimed to support the growth of the by its achievement in 2012 as “World’s economic, trade and tourism sectors. For Best Regional Airlines (Farhana & Martono the reason, Indonesia has issued permits for 2015). 247 domestic routes connecting 125 cities in Indonesia and for 57 international routes To implement the ICAO which connect 5 cities in 13 countries. Recommendation, the ROI issued Civil Indonesia has recorded strong growth Aviation Act of 2009 Act No. 1: 2009). in passengers’ trafic since 2008 withIt came into force on 12 January 2009. an average of 15 % per year, Indonesia The Civil Aviation Act of 2009 aims to passenger trafic in 2011 was 114 millionpromote the development of Indonesian air passengers (Indonesia’s Civil Aviation transportation. It regulates a host of matters Development, 2013). related to aviation, from sovereignity in airspace, aircraft production, operation and Indonesia has 233 airports including airworthiness of aircraft to aviation security 29 airports serving international lights. and safety, aircraft procurement, aviation Soekarno-Hatta International Airport is insurance, the independence of aircraft an Indonesia main gateway, which is also accident investigation, and the license of named as the 11th busiest airport in the world aviation professionals. by Airport Council International (ACI) in 2012 and the 4th busiest in Asia with 51.1 The Act also aimed at supporting the million passengers in 2011. Average annual development of national and international growth was 14 % in the last 10 years. A air transportation in Indonesia, including new terminal 3 is under construction for a provisions regarding the creation of a total volume of 62 million passengers per public services institute to further those year, to be completed as soon as possible. goals (Martono and Amad Sudiro, 2013). In December 2009, Forbes Traveler Almost all the provisions of the Chicago recognized Soekarno-Hatta International Convention in 1944 had been adopted Airport as the second most punctual airport by the Civil Aviation Act of 2009. Thus, in the world with 89.2 % of its light Indonesia has fully complied with departing on time, and 84.2 % arriving on the Chicago Convention in 1944.This time. legislation is in line with the 38th General

2 Jurnal Manajemen Transportasi & Logistik (JMTranslog) - Vol. 03 No. 1, Maret 2016 ISSN 2355-4721 Domestic Air Transport Regulations in Indonesia

Assembly Res.A38-4 which urges all service performed by aircraft for the public member States to continue to examine the transportation of passengers, mail and existing legislation and adjust as necessary cargo. or act laws and regulations to protect Article 97 of Civil Aviation Act of all the relevant safety data to the extent 2009 stipulates scheduled air services. It possible, on the legal and other guidance consists of full services, medium services developed by ICAO (G.A.Res.38th,, and no-frill services. Full services mean that 2013). In addition, the Civil Aviation Act during the light the passengers are given of 2009 also regulates scheduled as well food and beverages, snacks, and executive as non-scheduled air transportation, airline lounge for business class and irst class. capital, the ownership of aircraft, aircraft A medium service is purported among leasing, fares, the liability of air carriers, others provisions of light food (snack) and air navigation facilities, airport authorities other facilities such as executive lounge and services, and law enforcement related for passengers holding certain types of to air transportation. This research is a economic class are given to the passengers library research that intends to explore during light. No-frill services have only the implementation of provisions of the one class of service, without any provision domestic air transport regulations provided of foods and beverages, snacks, executive in the 2009 Civil Aviation Act. lounge, and check-in baggage and for this, RESULTS AND DISCUSSIONS a fee shall be charged from the passengers during the light. The scheduled air 1. Scheduled Air Transportation transportation company shall be obliged Domestic scheduled air transportation to inform the consumers regarding the is an air transportation activity serving air condition and speciication of services transportation from one airport to another being provided. airport within Indonesia territory. Article The scheduled airlines providing 1 (14) of Civil Aviation Act of 2009 medium and no-frill services shall be a stipulates that air transportation is any business entity with low cost carrier basis activity using an aircraft for transporting and shall be obliged to meet aviation passengers, cargo, and/or post for one route safety and security as well. They have to or more from one airport to another airport submit a request for authorization to the or several airports. In relation to services, MOC and MOC shall enact a scheduled air transportation consists of full services, air transportation company shall be medium services and no-frill services. With periodically evaluated. regard to air services, the meaning of air services can be found in Article 96(b) of In accordance with Article 83 of Civil Chicago Convention in 1944. It provides Aviation Act of 2009, air transportation air service means from any scheduled air shall consist of scheduled, non-scheduled,

Jurnal Manajemen Transportasi & Logistik (JMTranslog) - Vol. 03 No. 1, Maret 2016 3 Kemis Martono, Sandriana Marina, Aditya Wardana ISSN 2355-4721 domestic as well as international air foreign share holders (single majority transportation and general aviation. Air shares). Meanwhile capital requirement for transportation activities may be done with obtaining business permit can be found in scheduled services and/or non-scheduled Article 109 (1)(e). It provides that an air air services by national and/or foreign air transportation business entity shall submit transportation entity for passenger and the evidence of capital already deposited. cargo shipment or freighter. But, domestic Air transportation business permit shall be air transportation shall only be done by valid as long as he permit holders remain national airlines that have already obtained operating actual air transportation activities a business permit for air transportation. by continuously operating aircrafts in accordance with the permit granted, is An air transportation activity shall shall be evaluated annually. The result of be implemented by business entities in evaluation shall be used as consideration the ield of national air transportation. The for allowing the holder to remain running business permit will be given by the MOC its business activities. after fulilling administrative requirements, share holders, capital, aircraft ownership, The commercial air transportation business plan, human resources. business permit cannot be transferred to Administrative requirement among others another party before operating aircraft are submitting founding act (establishment in actuality as described in the business deed) of Indonesian business entity whose permit given. Transfer of commercial air business is in the ield of scheduled or non- transportation business permit may only scheduled air services and is enacted by be done after the permit holder runs the the Minister in charge, tax identiicationoperation, and obtains the approval of the number, domicile letter issued by the MOC. Any holders of air transportation authorized agency, approval letter from the business permit violating the provision agency responsible for capital investment shall be imposed with administrative sector if the company utilizes capital sanction, namely revocation of permit (Act investment facilities, evidence of capital No.15:1992). Further provisions regarding already deposited, bank guarantee and the the requirements, system and procedures of business plan for minimum of ive years. obtaining air transportation business permit and appointment of director of airlines Share holder requirements for shall be stipulated under a Ministerial obtaining business permit is provided Regulation. For that reason, based on in Article 108(3) of Civil Aviation Act Article 464 (Act.No.15: 1992) and 465 of 2009. It provides that in the case of (Act No.15 :1992) of the Civil Aviation Act capital of the national airlines owned by an of 2009, Ministerial Decree KM 25 Year Indonesian legal entity(s) or an Indonesian 2008 (Ministerial Decree KM 25 :2008) citizen(s) being divided, one of the national will be applied. share holders must remain larger than any

4 Jurnal Manajemen Transportasi & Logistik (JMTranslog) - Vol. 03 No. 1, Maret 2016 ISSN 2355-4721 Domestic Air Transport Regulations in Indonesia

Aircraft ownership requirements for In relation to human resources obtaining a business permit are provided requirements for obtaining a business in Article 118(2) of the Civil Aviation Actpermit, it can be found in Article 110 (e) of 2009. It provides that scheduled air and 111 of the Civil Aviation Act of 2009. transportation shall own at least ive unitsArticle 110(e) provides that the business of aircrafts and posses at least ive unitsplan shall contain the human resources aircrafts of the type(s) suitable for supporting consisting of management, technicians/ its business sustainability in accordance engineers and air crew, while Article 111 with the routes served. Meanwhile, non- of the Civil Aviation Act of 2009 provides scheduled air transportation shall at least management requirements. I provide own one unit aircraft and possess at least that any individual may be appointed as two units of aircrafts of the type(s) suitable a director of airlines after fulilling the for supporting its business sustainability in requirement of possessing operational and accordance with the operational areas to be managerial competence, air transportation served. Air transportation, especially for business management, certiied as being cargo, shall own at least one unit of aircraft it and after a proper test conducted by the and possess at least two units of aircrafts MOC. These requirements shall not be of the type(s) suitable for supporting its applicable for managing director of any air business sustainability in accordance with transportation business entity. the routes and operational areas to be With regards to the obligation of air served. transportation business permit holder, it can The business plan requirement for be found in Article 118 of the Civil Aviation obtaining a business permit is provided Act of 2009. It provides that holders of in Article 110 of Civil Aviation Act of air transportation business permit shall 2009. It provides that the business plan be obliged to perform air transportation shall contain the type and total number of activities in reality (de facto) no later than 12 aircraft(s) to be operated, core plan of light months upon issuance of permit by at least operation and light routes for scheduled air operating the minimum number of aircraft transportation, core plan of light operation owned and in possession in accordance for non-scheduled air transportation, with its business or activity scope, own and marketing aspect in the form of potential possess total number of aircraft, fulill the air transportation market demand, human provisions of mandatory transportation for resources consisting of management, shipment, civil passenger light, and other technicians/engineers, aircraft crew, provisions in accordance with the rules of preparedness and operational worthiness law and regulations, purchase shipment and economic and inancial aspect analysisliability insurance with liability value equal and evaluation. to insurance coverage for regular passenger air transportation proven by valid insurance

Jurnal Manajemen Transportasi & Logistik (JMTranslog) - Vol. 03 No. 1, Maret 2016 5 Kemis Martono, Sandriana Marina, Aditya Wardana ISSN 2355-4721 policy, serve potential passengers fairly served, light operation center of each without discrimination on ethnic, religion, air scheduled air transportation business race, inter-group, and economic and social entity, and intergration of domestic and strata, submit monthly air transportation international routes. activity report, including delays and 2. Requirements of Commercial Air cancellation of lights, no later than on the Transportation 10th of the next month for each month to the MOC, submit annual inancial report Aircraft accident of national airlines duly audited by an registered public auditor is a lesson for the future, because the irm which contains at the least a balance negative effect of such a fatal accident is sheet, proit and loss, cash low, detailed that a lot of creditors shall be paid by airline expenditures, no later than the end of April companies concerned. Such credits are of the next year of reporting year to the employees’ salaries, workers’ insurance, MOC, report any charges of management aviation turbine fuel, ground handling fees, or ownership of air transportation ramp handling fees, passengers’ handling business entity, changes of domicile of air fees, catering, landing fees, air navigation transportation business entity and changes service charges, parking stand fees, aircraft of aircraft ownership, to the MOC and storing charges, ofice rental, building fulill stipulated service standard. Furtherrental, room rental, aircraft maintenance provisions regarding the obligation of air fee, airport service charge, aircraft leasing, transportation business permit holders, aircraft insurance, air crew insurance, the requirements, system, and procedures legal liability insurance, third parties legal of sanction imposition shall be stipulated liability insurance, advance ticket booking, under a Ministerial Regulation. administrative fees, debt of the airlines company. All the debt shall be paid by Relation to light network and routes such company, not less than 435,5 billion of air transportation business can be rupiah, while the total capital of airlines is found in Article 122 of the Civil Aviation less than 300 billions rupiah. Therefore, Act of 2009. It provides that domestic the Civil Aviation Act of 2009 requests light network and routes for scheduled that new airlines shall have enough capital air transportation shall be determined by to guarantee the survival of operation, the MOC. The domestic light network because the bankruptcy of airline company and routes shall be determined, at least will affect consumers (Martono K. and with the considerations of demand for Amad Sudiro, 2012). air transportation services, fulillment of technical qualiications for light operation Meanwhile capital requirement for and airport facilities, airport facilities in obtaining business permit can be found in conformation with aviation safety and Article 109 (1)(e). It provides that an air security, all regions having airports are transportation business entity shall submit

6 Jurnal Manajemen Transportasi & Logistik (JMTranslog) - Vol. 03 No. 1, Maret 2016 ISSN 2355-4721 Domestic Air Transport Regulations in Indonesia the evidence of capital already deposited. preceding month, and report any changes Air transportation business permit shall be of management, ownership of aircraft(s), valid as long as he permit holders remain and/or domicile of head/central ofice to operating actual air transportation activities the MOC. by continuously operating aircrafts in The requirements of aircraft accordance with the permit granted, is ownership for obtaining business permit shall be evaluated annually. The result of of scheduled air transportation provided in evaluation shall be used as consideration the Civil Aviation Act of 2009 is relatively for allowing the holder to remain running something new compared with the Civil its business activities. Aviation Act of 1958, provided in the Civil Beside airline capital, for the Aviation Act of 1992. Even though it has requirement of obtaining a business been stipulated in the Ministerial Decree permit, the scheduled air services shall Number KM 81 Year 2004 that should own posses at least 10 units of aircrafts. Five at least two units of aircrafts, as amended units of aircrafts are owned and ive unitsby the Ministerial Decree Number KM of aircrafts of the type(s) are leased for 25 Year 2008, an airlines company shall supporting its business sustainability in own at least three units of aircrafts and accordance with the routes served. Mean posses at least two units of aircrafts of the while, non-scheduled air transportation type(s) suitable for supporting its business shall at least owned one unit of aircraft sustainability in accordance with the routes and posses at least two units of aircrafts of served ( Martono K and Amad Sudiro, type (s) suitable for supporting its business 2012). sustainability in accordance with the Joint enterprise has been regulated by operational areas to be served. Besides, air the Ministerial Decree S. 8/1/11-Phb 1976 transportation, especially for cargo, shall at (Ministerial Decree No. S.8/1/11-Phb: least own one unit of aircraft and posses at 1967), as amended by the Ministerial Decree least two units of aircraft with the routes SK 13/S/1971 (Ministerial Decree No. SK and operational areas to be served. 13/S/1971: 1971). For example, Ministerial Holders of general aviation permit is Decree provides for joint enterprise between implemented by the government, regional domestic and domestic airlines or domestic government, business entity(s) and certain airlines and foreign airlines with intention agency(s) are obliged to operate its aircraft to prevent monopoly conducted by GIA no later than 12 months after operational and MNA, but both Ministerial Decrees permit are issued, to comply with the do not regulate single majority shares that law and regulations on civil aviation and shall be owned by an Indonesian citizen other valid laws and regulations, to submit or an Indonesian legal entity (Act No.15: monthly air transportation activity report 1992). In practice, the shares are divided to the MOC no later than the 10th of the too small and inally the majority shares are

Jurnal Manajemen Transportasi & Logistik (JMTranslog) - Vol. 03 No. 1, Maret 2016 7 Kemis Martono, Sandriana Marina, Aditya Wardana ISSN 2355-4721 owned by foreign airlines. For that reason, sustainability in operation. Article 10 of the Civil Aviation Act of 2009 provides for the Civil Aviation Act of 2009 provides single majority shares that shall be owned that to obtain a business permit, an airline by an Indonesian citizens or an Indonesian shall at least meet the requirement of bank legal entity. The capital of national air guarantee. In addition, any air transportation transportation business, must be, entirely or supporting activity has to obtain a permit in majority, owned by an Indonesian citizen from the MOC. In order to obtain the or an Indonesian legal entity. The capital business permit for air transportation, of national air transportation business, supporting business activity shall also must be, entirely or in majority, owned fulill the bank guarantee requirements. by an Indonesian citizen or an Indonesian Aviation human resources are legal entity. In that case, the capital of the stipulated in Chapter XIX from article 381 national airlines owned by Indonesian legal to 393 of the Civil Aviation Act of 2009. entity or citizen(s) is divided, one of the Basically, the government is responsible for national shares holders must remain larger preparing and developing human resources than any foreign airlines share holders in the aviation ield. Aims and objectives of (single majority). aviation human resources are professional, This provision appears from the fact competent, disciplined, reliable and that there is an airline, even though there is having integrity. It shall consist of aircraft a regulation providing that an Indonesian personnel, air transportation personnel, citizen or an Indonesian airline shall own airport management, light air navigation, 51% of the total capital. But in practice, aviation safety and aviation security. In the capital is divided and the ownership order to achieve the aims and objectives, is not owned by an Indonesian citizen or the MOC stipulates policies on preparation an Indonesian airline, but it is owned by and development of human resources foreign airlines and engages management in aviation ields covering manpower of joint airline enterprise (Martono and planning, education and training, expansion Amad Sudiro, 2012). of job opportunities and supervision, monitoring and evaluation. In the Civil Aviation Act of 1958 and in the Civil Aviation Act of 1992, there In addition, all providers and are no requirements of bank guarantee to organization of aviation activities be submitted. It is different from the Civil having any activity in aviation ield are Aviation Act of 2009 and the Ministerial obliged to give contribution to support Decree Number KM 25 Year 2008, personnel preparation and development which requests the scheduled and non- in aviation ield. Such contribution shall scheduled air transportation to provide at least provide scholarship grants for bank guarantees. The requirement of bank education and/or training, establishment guarantee is very important for business of educational and training institute and/

8 Jurnal Manajemen Transportasi & Logistik (JMTranslog) - Vol. 03 No. 1, Maret 2016 ISSN 2355-4721 Domestic Air Transport Regulations in Indonesia or provision of educational and training compelled to own license or certiicate of facilities, in cooperation with existing competency. Aircraft personnel with direct education and training institute and/or involvement in operating an aircraft shall extending internship opportunities for be obliged to legitimate and valid license educational and training students/trainees. issued by the MOC. Personnel license will be issued by the MOC after fulilling the In accordance with Article 109 of the requirements of administrative, physical Civil Aviation Act of 2009, to obtain a and mental itness to ly, hold certiicate of business permit, an airlines shall submit competency in his/her ield and declaring the establishment deed of Indonesian entity having passed a professional test. Personnel whose business is in the ield of scheduled license shall be obtained through education or non-scheduled air transportation and and/or training organized by an accredited is enacted by the Minister in charge, tax institution. identiication number, domicile letter issued by the authorized agency, approval In relation to airport personnel, letter from the agency responsible for every airport personnel shall also be capital investment sector if the company/ compelled to own a license or competence individual concerned utilizes capital certiicate. Each airport personnel directly investment facility, evidence of capital involved in operation performance and/ already deposited and bank guarantee and or maintenance of airport facilities must business plan for a minimum period of ive own a legitimate and valid license. The years. license shall be issued by the MOC upon meeting requirements of administrative The requirement of business plan requirements, being physically and mentally shall contain human resources consisting it, possessing competence certiicate of of management, technicians, engineers, the ield and passing the examination/ aircraft crews. Any individual may be test. The competence certiicate shall appointed as a director of an airline after be obtained through education and/or fulilling the requirements of possessing training conducted by any institution duly operational and managerial competence accredited by the MOC in air transportation, is certiied it after a proper test conducted by the MOC, has 3. Tariff’s Regulation never been involved in any criminal legal The main function of tariff (ICAO conviction related to air transportation Doc.9228-C/1036:1978) regulation is operating and during management of the to secure the economic viability of the individual the company has never been agreed service in bilateral and multilateral declared bankrupt. agreement for the beneit of the travelling With regard to aircraft personnel, public and to eliminate the hazards of every personnel of an aircraft shall be free competition (LCJ Lehtonen:1977).

Jurnal Manajemen Transportasi & Logistik (JMTranslog) - Vol. 03 No. 1, Maret 2016 9 Kemis Martono, Sandriana Marina, Aditya Wardana ISSN 2355-4721

In addition, a tariff can have a signiicant The tariff of scheduled air inluence on airlines, travelers and transportation shall consist of passenger aeronautical authorities. For the airlines, transportation tariff and cargo shipment a tariff that is too low may jeopardize the tariff. The government’s policy regarding sustainability of an air carrier’s operations, tariff is neo-liberal. That is why the tariff while a tariff is too expensive may make of passenger consists of economic and it unaffordable for travelers to travel. For non-economic tariff. The passenger tariff aeronautical authorizes, a tariff is a means for economy is rigidly regulated by the to regulate the balance of the sustainability Government to protect the consumers of airlines’ operations and to guarantee that and passenger tariff for non-economy is travelers can afford the price for the beneit determined by air transportation companies of the travelling public. For these reasons, themselves based on market force (supply tariffs contained in bilateral and multilateral and demand) to guarantee the sustainability agreements must be carefully regulated by of air transportation company operation. aeronautical authorities. The passenger tariff for economy In the Civil Aviation Act of 2009, class shall be calculated based on an tariff refer to all tariffs, rates, fares, fees, amount of tariff per light route per one trip, charges or any other payments related to for each passenger, which is a calculation aviation activities. Tariff could therefore resulted from the basic tariff multiplied concern matters as wide-ranging as by distance and taken in consideration on ticketing, international and national buying/purchase power or affordability. passenger service fees, air navigation The distance tariff shall consist of basic service fees, landing fees, stand parking average fee plus reasonable proit, value service fees, aircraft storage service fees, added tax imposed based on taxation hajj service fees, and also on. regulations, passenger accident insurance which is imposed based on the law and Domestic tariffs are provided in regulations on mandatory passenger Part four of the Civil Aviation Act of 2009 accident liability insurance and surcharge. (Act No.1:2009), and consist of tariffs for In terms of “surcharge” purported the scheduled air transportation of passengers charge imposed due to additional cost of and shipment of cargo. Basically, tariff that air transportation company has to pay policies are neo-liberal in nature since the outside stipulate distance tariff such as, tariffs consist of economy and non-economy among others, luctuation fuel surcharge. tariffs. Economy class tariffs are regulated Cost of that air transportation company has by the MOC to protect consumers, while to bear due to lack of o no passengers on non-economy class tariffs are determined the returning lights, outbound or inbound, by airline companies based on market for celebration holiday. In determining forces. regular air transportation tariff, the MOC

10 Jurnal Manajemen Transportasi & Logistik (JMTranslog) - Vol. 03 No. 1, Maret 2016 ISSN 2355-4721 Domestic Air Transport Regulations in Indonesia shall consider the interest of aviation safety mechanism. The tariff for domestic and security as well as the public and air non-scheduled air transportation for transportation operation. passenger shall be determined on the agreement between users and providers of The result of tariff calculation shall transportation services, while the tariff for become the passenger’s tariff ceiling for international scheduled air transportation domestic economy class air transportation. for passengers shall be determined Tariff ceiling for domestic economy class based on the results of the bilateral passenger shall be stipulated by the MOC air transportation agreement. Further by taking into consideration the aspect of provisions regarding tariff for domestic protection of consumers form imposition scheduled air transportation and the system of high tariff by air transportation business and procedures of administrative sanction entity and protecting consumers from imposition shall be stipulated under a light information/advertisement that is Ministerial Regulations. For that reason, potentially disadvantageous/ misleading. the MOC issued the Decree 26 dated April Hence, the stipulation on tariff 14, 2010 (Ministerial Decree No.26:2010). ceiling and air transportation legal entity Ministerial Decree 26 dated April protection are against unfair/unhealthy 14, 2010 provides that passenger tariff competition. The scheduled economy class for economy class shall be calculated passenger tariff stipulated by the MOC based upon distance tariff, tax, mandatory shall be disseminating the tariff ceiling insurance accident and surcharge. Distance stipulated by the MOC, whether done by the tariff is the amount of tariff per light route MOC or by the air transportation business per one trip, for each passenger, which is themselves through print and electronic a calculation result basic tariff multiplied media and/or presenting it at every airplane by distance and taken into consideration ticket sale place to consumers. on buying/purchase power or affordability. Domestic air transportation business Meanwhile, tax is value added tax imposed entities shall be prohibited from selling based on taxation regulations. Mandatory economy tickets above-mentioned ceiling insurance accident is passenger insurance tariff stipulated by the MOC. Any air accident which is imposed based on the law transportation business entity violating the and regulations on mandatory passenger provisions of selling economy tickets shall accident liability, while surcharge is the be imposed with administrative sanction charge imposed due to addition costs that such as warning and/or light route permitthe air transportation company has to pay revocation. outside stipulated distance tariff, such as luctuating fuel surcharge and the cost of air Passenger tariff for domestictransportation the company has to bear due non-economy services of scheduled air lack of or no passengers on the returning transportation shall be based on market

Jurnal Manajemen Transportasi & Logistik (JMTranslog) - Vol. 03 No. 1, Maret 2016 11 Kemis Martono, Sandriana Marina, Aditya Wardana ISSN 2355-4721 lights outbound or inbound, for example In determining tariffs, the MOC during big celebration holidays. Domestic considers the interest of aviation safety passenger tariff for economy class consists and security, as well as the needs of of tariff based on the use of jet aircraft and the public and airlines’ operation (Act. propelled aircraft. No.1:2009). MOC Decree Number 26 of 2010 (Ministerial Decree No.26 : 2010) The DGAC proposes the amount clariies how passenger tariffs for economy of tariff calculation after coordination class are determined and that they are based with national air carrier association and on the distance lown, tax, mandatory association of consumers. The amount of accident insurance and surcharges. The tariff consists of airlines group services distance tariff is the amount of tariff per that are 100% maximum tariff for airlines light route per trip, for each passenger, providing full services, maximum of 90% and is a calculation based on the basic tariff for airlines providing medium services multiplied by the distance. This formula and 85% of maximum tariff for non- also factors in the nation’s purchasing frill services. The amount of scheduled power or affordability of the tariff. The economy class passenger tariff determined distance tariff consists of a basic average fee by the MOC shall be disseminated as the plus a reasonable proit a value-added tax tariff ceiling through print and electronic based on taxation regulations (Martono and media and/or presenting it at every airplane Amad Sudiro: 2012). Mandatory passenger ticket sale place to consumers. accident insurance is required by laws and The tariffs set by the MOC have an regulations. Surcharges are imposed based upper limit which takes into account factors on additional costs that the air transportation such as the need to protect consumers and company has to pay to operate the business. prevent unfair competition. On the whole, The provision stipulates that the distance Indonesia’s aviation regulations protect tariff may be adjusted due to factors such as, consumers by indirectly specifying a lower among others, the luctuation of fuel prices. limit for the determination of tariffs, and Costs that the air transportation company at the same time the tariff regulations also must bear due to lack of passengers on prevent under pricing practices by air service returning lights, outbound or inbound, are providers that aim to squeeze competing also included in the calculation of the tariff. carriers out of the market. At irst glance,With regard to the luctuation of fuel prices, however, it appears that this determination the MOC recently issued the increase the of tariffs does not adequately factor in the amont of surcharges consistent with the commercial side of the air service industry, value of American dollars (Ministerial Reg. especially for those offering premium No.PM 2: 2014). services Martono & Sudiro, 2012). Tariffs ceiling for domestic economy class passengers are stipulated by the MOC

12 Jurnal Manajemen Transportasi & Logistik (JMTranslog) - Vol. 03 No. 1, Maret 2016 ISSN 2355-4721 Domestic Air Transport Regulations in Indonesia to prevent the imposition of high tariffs by are prohibited from selling economy tickets airline companies and protect consumers above the upper limit tariff established from misleading advertising. The tariff by the MOC. In practice, however, the for scheduled economy class passengers competition between secheduled airlines is disseminated either by the MOC or can be very ierce, and, as a result of the by the airlines themselves through print operation of the market, air services have and electronic media and/or presented been classiied into three categories of to consumers wherever airplane tickets tickets in order to avoid the restrictions set are sold. Domestic airlines are prohibited by the MOC. There are daily, weekly and from selling economy tickets above the monthly fares. tariff ceiling provided by the MOC, and Daily tickets consist of prime-time any airline violating this prohibition will tickets for lights between 4.30 a.m. and receive sanctions in the form of a warning 9.30 a.m., which are very pricey, and tickets and/or light route permit revocation. for lights between 12.00 p.m. and 3.00 In addition, domestic passenger p.m., which are the cheapest. In the weekly tariffs for economy class consist of tariffs category, lights on Tuesdays, Wednesdays based on whether the aircraft used is a jet- and Thursdays are very cheap, and lights powered or propeller powered aircraft. on Fridays, Saturdays and Sundays are very Indonesia’s DGAC proposes the maximum expensive. However, even if the price is tariff after coordinating with national very expensive, no price is higher than the air carrier associations and consumer upper limit tariff. In addition, there are other associations, and the tariff is also relectivevariations such as promotional tariffs and of the class of service provided. Airlines normal economy tariffs.Promotional tariffs providing full service may charge 100% are cheaper than normal economy class, of the maximum tariff, whereas airline while economy tariffs consist of regular providing medium service my charge economy class lexible economy class and 90% of the maximum tariff, and airlines rigid economy class fares. This strategy providing no-frills service may charge only not only avoids the price restrictions set by 85% of the maximum tariff. the MOC, but also, in effect inluences the behavior of consumers and the travelling As mentioned earlier, tariff policies public in Indonesia are basically neo-liberal in nature, as the tariffs consist of economy and Especially in the holiday months, non-economy tariffs. Economy class tariffs such as scholl holidays, celebration of days are regulated by the MOC in order to ensure signiicant to Muslims (such as Lebaran) the viability of public transportation and to and the Christmas holidays, tickets price protect the interest of the traveler. An upper almost reach the upper limit established by limit is set by the MOC to prevent unfair the MOC. During those periods, the demand competition between airlines and airlines for travel increases signiicantly and almost

Jurnal Manajemen Transportasi & Logistik (JMTranslog) - Vol. 03 No. 1, Maret 2016 13 Kemis Martono, Sandriana Marina, Aditya Wardana ISSN 2355-4721 all domestic scheduled airlines provide with non-scheduled national airlines for extra lights to cater to these demands. passengerFor and cargo shipment or freighter. non-scheduled airlines, and, in response to Under the existing demands of the increase in demand during peak travel capacity air transportation through certain periods, tariffs are subject to negotiation routes that cannot be fulilled by the between the user and the provider of air capacity of air transportation service with transportation. light route operates permanently and During school holidays, Muslim regularly operated in compliance to law holidays and Christmas holidays, the MOC provision for air transportation services rigidly controls the implementation of tariff that are not bound to permanent and regulations. Scheduled airlines are obliged regular light routes and scheduled among to disseminate the tariff through print and others, tourism packages, MICE (meeting, electronic media and/or by presenting the incentive, conference, and exhibition), set price on every airplane ticket. Any air transportation for pilgrimage, natural airline violating these provisions will disaster assistance, and national and receive administrative sanctions in the international activities temporary in nature, form of a warning and/or risk the scheduled light air transportation may operated permit being revoked (Martono and Amad non-scheduled air transportation activities Sudiro : 2012). In the three years since the upon approval from the MOC. But non- Civil Aviation Act of 2009 came into effect, scheduled air transportation operated by no scheduled airline has violated the upper scheduled air transportation company, may limit on tariffs as set by the MOC, meaning not disturb the services on the routes if that all scheduled airline are complying its own responsibilities and on the routes voluntarily with such regulations. are still served by other scheduled air transportation companies. 4. Non-Scheduled Air Transportation Domestic non-scheduled air In Indonesia, non-scheduled air transportation may only be conducted by a transportation is regulated by the Decree national airline possessing a non-scheduled of SKEP/1657/VIII/76 (DGAC Decreed air transportation business permit and SKEP/1657/VIII/76:1976) such as shall be conducted based on the light advance booking charter, afinity group, approval. In a situation where demands inclusive tour charter, including a charter for transportation services cannot be met for the purpose of pilgrimage, non-season or served by regular air transportation pilgrimage, tour packages, meeting, companies for a certain route(s) and are incentive, conference, special even temporary in nature, a domestic non- charter, student charter, own use charter. scheduled air transportation companies Air transportation activities may be done for a certain route(s) and are temporary

14 Jurnal Manajemen Transportasi & Logistik (JMTranslog) - Vol. 03 No. 1, Maret 2016 ISSN 2355-4721 Domestic Air Transport Regulations in Indonesia in nature, a domestic non-scheduled air air photography, survey, mapping, search transportation company may undertake and rescue, calibration, air transportation scheduled air transportation activities after for aircraft operation personnel activities obtaining an authorization or approval or other air transportation of which from the MOC. The temporary scheduled main activity is not air transportation air transportation may be initiated by a business. The MOC may be given to hold government, local government agency and/ general aviation activities for purpose of or a national air transportation company. passenger and goods transportation in certain regional(s), by fulilling certain The temporary scheduled air requirements that are temporary in nature. transportation activities must not cause any Holders of general aviation permit violating disturbance to air transportation services on the conduct of air transportation activities the routes still served by the other scheduled shall be imposed with administrative air transportation company. Non-scheduled sanction, namely warning, freezing of air transportation activities may be in permit, or permit revocation. the form of afinity group, inclusive tour charter, own use charter, air taxi or that in With regard to the permit of general one airplane there are various groups with aviation, activities shall be conducted after different purposes (split charter), such as for obtaining the MOC’s permit/approval. In sick persons (patients) humanely program, order to obtain operation permit for general parachuting activities. The development of aviation activities by the Government, non-scheduled air transportation indicates regional government, Indonesian business that as a whole the number of non- entity, and certain organization(s), one scheduled air transportation is relatively shall have to possess clearance from the strong, in line with the increase of markets agency supervising the company(s) core of non-scheduled air transportation are the activities, founding/establishment act/deed island of Sumatra, Kalimantan and Papua. of the business entity or the organization approved by the Minister in charge, tax 5. General Aviation identiication number, domicile letter General aviation is air transportation for business site issued by the agency in used for personal purposes to support his/ charge, and air transportation plan. her business activities which core/main Other requirements to obtain business other than air transportation. business permit for general aviation General aviation may be carried out by activities undertaken by an individual who the government, regional government, has a personnel identity card issued by the social organizations, sports association, authorized agency, tax identity number, individual and/or other Indonesian legal address of his/her business site issued by entity. It consists of air transportation for the authorized agency in charge and air aerial work such as agriculture spraying, transportation activity plan. The documents

Jurnal Manajemen Transportasi & Logistik (JMTranslog) - Vol. 03 No. 1, Maret 2016 15 Kemis Martono, Sandriana Marina, Aditya Wardana ISSN 2355-4721 of clearance from the agency supervising business entity. The regional government the company’s core activities, founding/ has to guarantee availability of land site, establishment act/deed of the business infrastructure. The pioneer air transportation entity or the organization approved by shall be implemented integrity with other the Minister in charge, tax identiicationsectors based on the regional development number, domicile letter for business site approach and evaluated annually by the issued by the agency in charge, shall be Government. The result of evaluation submitted in copies legalized by the issuance may change a pioneer air transportation agency, and the original documents shall routes into commercial routes. Pioneer be shown to the MOC. The activities plan air transportation activities shall be given shall at least contain type and total number compensation to ensure sustainability of aircrafts to be operated, core of activity to service on the routes and scheduled of light operation, human resources stipulated. Such compensation shall be consisting of technicians, engineers and in the form of other route(s) outside the air crew as well as preparedness and pioneer route(s), inancial assistance for worthiness of operation. operation, and/or inancial assistance for the fuel. The general aviation business permit shall be valid as long as the permit holder CONCLUSION remains de facto operating air transportation It is concluded that the provision activities by continuously operating of air transport regulation provided in aircrafts. However, the permit shall be the Civil Aviation Act of 2009 has been evaluated on performance of a permit fully implemented and compliances with holder of general aviation air transportation the airlines in Indonesia. The indicators activity every year. The result of evaluation being discussed are scheduled air shall be used as consideration of letting transportation includes the requirements he holder maintain his/her/its business of the establishment of airlines, capital activities. Further provision regarding the of air transport business entities, aircraft requirements, system and procedures of ownership and operation requirements, obtaining general aviation permit shall be share holder composition, bank guarantee stipulated under MOC. requirements, aviation human resources. 6. Pioneer Air Transportation It also discussed about tariff’s regulations includes passenger’s tariff, passengers’ Pioneer air transportation is a protection, best practices; non-scheduled domestic air transportation activity serving air transportation; general aviation and light route and network linking remote and pioneer air transportation. underdeveloped regions not yet served by other modes of transportation. It is served by the commercial air transportation

16 Jurnal Manajemen Transportasi & Logistik (JMTranslog) - Vol. 03 No. 1, Maret 2016 ISSN 2355-4721 Domestic Air Transport Regulations in Indonesia

Bibliography Law & Regulation of Air Transport and Space Application, 26-29 April, Articles National Law University, New Delhi, Farhana & K.Martono. 2015. ”Indonesia’s INDIA. Contribution to the International Civil Aviation”. Paper submitted to the Celebrating 71st Year of the Chicago Documents Convention of 1944 in the Seminar Act Concerning Foreign Investment, Act “Peraturan Penerbangan di Indonesia” No.1 Year 1967. Conducted by Sekolah Tinggi Manajemen Transportasi (STMT)- Act Concerning Civil Aviation. Act.No.15 Trisakti on 10 December 2015 in of 1992 (State Gazette of the Republic . of Indonesia Year 1992 Number 53, Supplement to the State Gazette of Lehtonen, LCJ. 1977. The Bilateral Air the Republic of Indonesia Number Transport Agreement of Finland: 3481). A Study in Pulic International Air Law [Thesis]. Montreal : Mc Gill Act concerning Civil Aviation, Act University Institute of Air and Space No.1 of 2009 [Civil Aviation Act], Law. Ministry of Transportation Republic of Indonesia, online: Directorate Mahmud, Fachri. The Development of General of Civil Aviation http:// Air Transport Policy in Indonesia, hubud.dephub.go.id/?en/uu. unpublished. Director General of Air Communications Martono, K. (Ed). 1987. ”Angkutan Udara Decreed Concerning Type(s) and di Indonesia Sebelum Kemerdekaan” Implementation of International Non- in Hukum Udara, Angkutan Udara Scheduled to and from the Republic dan Hukum Angkasa . : of Indonesia. Director General Penerbit Alumni. of Air Communications Decreed Martono, K. & Amad Sudiro. 2013. No.SKEP/1657/VIII/76. Current Air Transport Regulations in Indonesia’s Civil Aviation Development, A Indonesia. XXXVIII Ann Aur &Sp L paper submitted to Sixth Meeting of 55. Worldwide Air Transport Conference, Martono, K. & Amad Sudiro. 2012. ” Montreal, 18 to 22 March 2013. New Indonesian Air Transportation Governement Regulation Concerning Policy Based on Civil Aviation Act Change from State-owned Enterprise of 2009 ”. Paper submitted to Third (PN) Perhubungan Udara to Limited Annual International Conference on

Jurnal Manajemen Transportasi & Logistik (JMTranslog) - Vol. 03 No. 1, Maret 2016 17 Kemis Martono, Sandriana Marina, Aditya Wardana ISSN 2355-4721

Company Liability (PT) Garuda regarding Commercial Air Transport Indonesian Airways. Govt. Reg. Business Within an Indonesian 67/1971 (1971). Territory Using Fix Wing Aircraft. Ministerial Decree No. S.8/1/11-Phb Government Regulation Concerning (21 September 1967). Change from State-owned enterprise (PN), Perhubungan Udara Daerah dan Penerbangan Serba guna “ Merpati Ministerial Decree Concerning Routes Nusantara” to Limited Company Structure of PN Merpati Nusantara Liability (PT) Merpati Nusantara Airlines.. Ministerial No. S. 8/2/5- Airlines (MNA), Indonesia Govt. Mphb (13 January, 1969). Reg.70/1971 (1971). Ministerial Decree Concerning Home ICAO Doc.9228-C/1036 (1978) Based of Airlines. Ministerial Decree Concerning Standard Bilateral Tariff Number SK 402/S/70 (30 December, Clauses, Standard Bilateral Tariff 1970). Clauses], Ministerial Decree Concerning Ministerial Decree Concerning Requirements and Provisions of Requirements and Provisions General Aviation Within Republic Regarding Using Airplane for of Indonesia. Ministerial Decree No, Commercial. Ministerial Decree No. 31/U/p/1970 ( 2 February, 1970). SK 13/S/1971 (18 January 1971). Ministerial Decree Concerning the Ministerial Decree Concerning Garuda Requirement and Provision Indonesian Airways Permit. Regarding Using Commercial Minsterial Decree No. T 14/4/4-U Airplane in Indonesia. Ministerial (11 July 1961). Decree No. SK 13/S/1971. Ministerial Decree Concerning Routes Ministerial Decree Concerning Business for PN Merpati Nusantara Airlines. Permit to PT Indonesia Air Transport Ministerial Decree No.S. 8/2/5-Phb. within framework of Implementation Ministerial Decree Concerning Garuda of Ac t Number 1 Year 1967 Indonesian Airways Permit form Concerning Foreign Investment. Jakarta to Medan, Padan, Palembang, Ministerial Decree No. KM 40/T.1b/ Belitung, Teluk Betung. Kotaradja Phb-75. dan Bengkulu. Ministerial Decree Ministerial Decree Concerning Engagement No. T.14/4/4-U. of Air Transport. Ministerial Decree Ministerial Decree Concerning No. KM 81 Year 2004. Requirements and provision

18 Jurnal Manajemen Transportasi & Logistik (JMTranslog) - Vol. 03 No. 1, Maret 2016 ISSN 2355-4721 Domestic Air Transport Regulations in Indonesia

Ministerial Decree Concerning Air Transportation Engagement. Ministerial Decree No. KM 25 Year 2008.

Ministerial Decree Concerning Calculation Mechanism and Determination of Ceiling Passenger for Economy Tariff Class of Air Transportation Domestic Services.Ministerial Decree No.26 Year 2010 (14 April 2010).

Ministerial Regulation Concerning the Amount of Surcharges of Domestic Scheduled Transportation Tariffs, Ministerial Regulation No.Pm 2 of 2014 (16 February 2014).

The 38th General Assembly Resolution, Montreal, 24 September – 4 October 2013 A38-4.

Others

Indonesian Aviation : Outlook 2010, published by Indonesian National Air Carriers Association. Jakarta : 2010.

Jurnal Manajemen Transportasi & Logistik (JMTranslog) - Vol. 03 No. 1, Maret 2016 19