Indonesia Readies Airline Subsidies Amid Virus Outbreak

 - February 20, 2020, 2:55 PM
Garuda Indonesia has halted 40 daily flights to mainline China. (Photo: Boeing)

Indonesia’s Ministry of Transportation on Thursday said it would roll out financial relief measures in a bid to revitalize the economy and support struggling operators affected by the coronavirus outbreak.

Transport minister Budi Karya Sumadi declined to elaborate on the proposed incentives for airlines but did say Indonesia would offer subsidies to local carriers serving both the domestic and international markets, noting the severe effect on employment within the sector. Three government agencies—the Ministry of Finance, the Ministry of Transportation, and the Ministry of Tourism and Creative Economy—plan to finalize a joint financial relief policy report by next Monday.

Meanwhile, the government is considering plans to bail out state-owned enterprises including oil and natural gas corporation Pertamina and airport operator Angkasa Pura with a financial relief package that could vary from tax reductions and reduced airport and handling fees to lower jet fuel prices and the easing of slot permits. Indonesia’s tourism sector appears also set to benefit from a set of incentives including discounts of up to 30 percent for both foreign and local travelers to select domestic destinations.

Indonesia moved to temporarily suspend all flights to China earlier this month as efforts to contain the virus intensified. National flag carrier Garuda Indonesia halted 40 weekly flights to mainland China, while the Lion Air Group, Southeast Asia’s biggest carrier by fleet size, suspended service to 15 Chinese destinations. This week, the transport minister urged airlines to reroute their China flights to new potential markets and/or add capacity on busy routes. Minister of Tourism and Creative Economy Wishnutama Kusubandio previously estimated that Indonesia could lose $4 billion if flights from China remained suspended over 2020.

In a separate development, the government of Hong Kong revealed late Wednesday that it would dispense $3.86 billion worth of relief measures to support financially distressed businesses as well as fund public health initiatives to combat the virus.