LEGAL UPDATES BY BEPARTNERS
Travel & Transportation
Mudik Prohibition vs Flight Industry Survivability
08 May 2020

The Covid-19 pandemic continues to wreck havoc throughout the world. The virus does not discriminate what religion or what race an individual is, it affects all segments of populations and is particularly detrimental to those vulnerable social groups such as the elderly and the poor.

 

Hundreds of countries have now or are beginning to implement travel restrictions and border shutdowns, heavily impacting the mobility of individuals’ worldwide. The current situation in Indonesia as of 24th of April has officially halted all commercial flights, ships (sea-travel), and long-distance train services until 31 June 2020, in continual efforts to further suppress the spread of Covid-19 within the archipelago.

 

This attack on the human race could not have come during a worst time, as this is the time of the year where millions of Indonesians reunite with their loved ones and spend valuable lost time. Mudik is Indonesia’s largest mass homebound exodus that is traditionally made every year, where millions of Indonesians return back to their hometowns before or during major holidays such as Idul Fitri (Eid al-Fitr). Unfortunately, this is no longer possible as per the Ministry of Transportation issued Regulation No. 25 of 2020 regarding Transportation Control During 1441 Eid al-Fitr Mudik Period for Covid-19 Spreading Prevention (“GR No.25 /2020”) as signed by the Minister on 23 April.

 

Effectiveness of GR No.25/2020

 

This regulation in essence tackles two possible concerns of the government. To prevent an Idul Fitri mudik (exodus) to effectively reduce Indonesians further spreading the virus as this may be spread during and through all forms of transportation, and inhibit and expel all possibilities of Covid-19 cases from other countries entering Indonesia unless expatriates looking to enter Indonesia fulfill all certain criterion (please refer to our article on Temporary Prohibition of Foreigners).

 

An interesting point in the regulation is the temporary prohibition applies only for domestic commercial airline operations to fly from or to a location that are categorized as red zones. This prohibition is however not applicable for domestic flights for governmental visits, embassy or international consulate purposes, repatriation flights, law enforcement, cargo and other flight purposes that are approved by the Directorate General for Air Transportation.

 

Within the regulation, Article 23 is also an extremely important point for individuals travelling to and from Indonesia as it states that commercial airline companies must provide 100% refunds for any customer who have bought flight tickets from 24 April 2020 until 31 May 2020.[1] However, it may be refunded in the form of re-schedule, re-route, point compensations and/ or in the form of flight ticket voucher. Further liaison with the respective airline company is required to settle how such a compensation will be settled.

 

Although GR No.25/2020 is effective until the 31 of May, further extension of the ban may occur resulting in continuous rupturing of the travel and tourism industry economy. Airports, airlines, travel ticket agents and hotels are just some within the travel industry that are the worst affected of all major economic sectors. With the worsening of the Covid-19 pandemic coupled with the Mudik banning, leaves business owners and major airline companies alike pondering as to how long are they able to survive for? When will there be possibilities for governmental bailouts?

 

Impact upon Travel Industry

 

Traveloka as one of the strongest online ticket agencies in Indonesia is one of numerous companies that has fallen victim to the the huge financial impact of this pandemic. According to Traveloka’s Head of Transport Business Caesar Indra, quoted from Nikkei Asian Review, since the outbreak of Covid-19 the company has received a massive amount of refund claims from customers who have cancelled their travelling plans due to the pandemic.[2] This consequently resulted in a significant amount of staff being laid off due to the decline in online travel bookings.

 

Tiket.com is also another online travel booking website that has suffered tremendous losses. Chief Marketing Officer & Co-Founder of Tiket.com Gaery Undarsa, states that Tiket.com sales have slumped to only around 25% due to decreases of booking and massive refunds and will most likely continue to fall.[3]

 

Some of the losses of profit in the abovementioned industries occurred prior to the travel prohibition of GR 25/2020, now with the recent banning of all domestic flights during Mudik, the local travel and tourism industry will undoubtedly continue to suffer large financial losses, as evident by Tiket.com and Traveloka.

 

Closing Remarks

 

The end of the Covid-19 pandemic is unclear and no-one will be able to give an exact date. The future economic implications upon Indonesia’s travel and tourism industry will continue to plummet due to this pandemic now combined with this GR 25/2020 travel ban. Unless the government steps in and provides significant financial aid to struggling travel industry players as means to continue their operations, liquidation and bankruptcy filings will be next in line.

 

If there are any queries with regards to how this may affect your business, please contact us for further legal consultation.

 

This information does not, and is not intended to, constitute as legal advice; instead, all information, content, and materials are for general information only.

 

©2020. BE Partners. All Rights Reserved

[1] Ministry of Transportation issued Regulation No. 25 of 2020 regarding Transportation Control During 1441 Eid Al-Fitr Mudik Period for Covid-19 Spreading Prevention, Art 23

[2] Shotaro Tani and Ismi Damayanti, 'Coronavirus Drives Indonesia's Traveloka To Lay Off Staff' (Nikkei Asian Review, 2020), [Online] as accessed through <https://asia.nikkei.com/Business/Startups/Coronavirus-drives-Indonesia-s-Traveloka-to-lay-off-staff>.

[3] Arie Liliyah, 'Bisnis Tiket.Com Terdampak COVID-19, Gaery Undarsa Jalankan Skenario Bertahan | SWA.Co.Id' (SWA.co.id, 2020), [Online] as accessed through <https://swa.co.id/swa/business-strategy/bisnis-tiket-com-terdampak-covid-19-gaery-undarsa-jalankan-skenario-bertahan>.