Garuda Indonesia is facing continued pressure from its majority shareholder, the Indonesian government, to lower ticket prices and stimulate tourism as the economy flags, a move analysts described as political meddling that will hurt investor confidence. After the transport minister’s appeal last month to Garuda and other domestic airlines, Indonesian President Joko Widodo’s most trusted minister Luhut Panjaitan this week chided the country’s flagship carrier and ordered it to lower ticket prices by next week. “The government has made repeated appeals to airline operators [to cut ticket prices],” Luhut, the Coordinating Minister of Maritime Affairs reportedly told airline executives, according to leaked minutes of their meeting on Monday. Explained: Asia’s aviation success stories – and its biggest flight disasters Panjaitan suggested expensive ticket prices would discourage air travellers in the domestic market and tarnish the government’s image among Indonesians, who will vote in presidential and legislative elections on April 17. “The problem of airline ticket prices could cause various public perceptions … that could trigger chaos,” he was quoted as saying by local media outlet Tempo, which published the minutes. “Garuda Indonesia, as the leading national airline operator, must cut ticket prices … it is an order.” Chief economist David Sumual of Bank Central Asia, Indonesia’s largest bank, said the call to action was “a bad signal to investors”. The Indonesian government owns 60 per cent of Garuda. The balance is held by a subsidiary of wealthy businessman Chairul Tandjung and floated on the Indonesian stock exchange. “Investors might feel hindered when it comes to investing in sectors where state-owned enterprises have dominant pricing power or market share,” Sumual said. “Populism is not always good for the economy.” The Indonesian government has sought to raise consumer sentiment and shore up the economy, which expanded by about 5 per cent last year, short of the 7 per cent Widodo promised when first elected almost five years ago. They should not intervene …. ticket prices are part of the business strategy of each airline Gerry Soejatman, aviation analyst Southeast Asia’s largest economy has banked on tourism as a growth driver while grappling with decreased earnings from flagging exports. In a report last June, the CAPA Centre for Aviation said domestic air travel made up 75 per cent of total passenger traffic. But visitor numbers to Indonesia increased by 49 per cent in the four years until 2017, while Garuda Indonesia was the market leader, ferrying 39 per cent of all international passengers using Indonesian airlines. About 15.58 million people visited the archipelago, home to about 265 million people, last year from 14.04 million in the previous year, according to data from statistics office BPS. In January, several Indonesian carriers including Garuda dropped ticket prices by as much as 60 per cent, following public backlash over price spikes during the holiday period, Bloomberg reported. Asia’s aviation industry is booming, so why isn’t it making money? In early February, Transport Minister Budi Karya Sumadi appealed to airlines to make further reductions, after state oil company Pertamina, lowered the price of jet fuel at the capital’s Soekarno Hatta International Airport slightly from 8,210 rupiah (58 US cents) per litre to 7,960 rupiah. Pertamina noted the new price was 26 per cent lower than the cost of fuel at Singapore’s Changi Airport, where it cost 10,769 rupiah per litre. Subsequently, Garuda’s chief executive officer I Gusti Ngurah Askhara Danadiputra, known as Ari Askhara, announced a further discount of 20 per cent. “This is in line with the aspirations of Indonesians, a number of national industry associations, and the [wishes of] the president of Indonesia, who wants a reduction in flight prices to support economic growth, especially in the tourism sector,” Ari said on February 16. As Prabowo steps up his game, no easy victory in sight for Jokowi A Garuda spokesman did not respond to a request to explain the government’s latest order to make further price reductions. Aviation business analyst Gerry Soejatman said the government’s interference encroached unduly on the independence of the airline. “They should not intervene …. ticket prices are part of the business strategy of each airline. They can decide prices as long as they are still in the range between minimum and maximum prices,” Soejatman said, according to Tempo. For travellers such as Frederik Sabini, who works in Jakarta, the discount is good news as he plans to fly for a family gathering in August but he will wait before booking to take advantage of any further reductions in fares. Asia’s budget airlines struggling to get rapidly expanding fleets into the air “I have not made any booking yet, as I am waiting for the price to go down further in the coming months,” the 28-year-old said, adding that a one-way direct flight from Jakarta to Labuan Bajo, which takes two-and-a-half hours, now costs 2 million rupiah on Garuda and about 1.5 million rupiah on Citilink, one of Garuda’s low-cost subsidiaries. “I will book the ticket in early July.” Sumual, the BCA economist, said the government’s move would have two knock-on effects. First, it could deter investors from buying stocks in companies where the government holds a large stake, “especially before elections”. Second, Sumual said assuring investors the government will not meddle in business affairs remains an uphill battle, which is a concern since the country needs continued investments in infrastructure.