Indonesia’s price floor for airlines is misguided, a bad precedent and will be counterproductive

Regulation of Indonesia's airline sector is becoming more stringent as the government introduces a new floor price which will force carriers to stop selling heavily discounted fares. The new measure is an unfortunate knee jerk response that will purely have a commercial impact on airlines. Ostensibly a safety related move, it can only have a counterproductive effect in that regard.

The Indonesia's airline sector is already over-regulated with unnecessary and impractical rules governing fares and splitting airlines into categories. Indonesia should be deregulating its vibrant industry and instead focus on upgrading infrastructure to facilitate future growth and meet global standards.

Indonesia's domestic market has nearly doubled in size over the past five years and prospects for long-term growth remain bright. But growth slowed in 2014 as most airlines became unprofitable. This is hardly the time for new regulations that meddle in commercial matters and have nothing to do with operations or safety.