Determinants of Aviation Fuel Prices, Inflation, and Operational Digitalization on the Financial Performance of Low-Cost Carriers in Indonesia

Abstract

This study analyzes the effects of jet fuel prices, inflation rates, and operational digitalization on the financial performance of Low-Cost Carriers (LCCs) in Indonesia during the 2013–2024 period, encompassing the pre-pandemic, COVID-19 pandemic, and economic recovery phases. A quantitative approach was utilized employing Ordinary Least Squares (OLS)-based multiple linear regression on secondary data comprising LCC financial statements, international jet fuel prices, the consumer price index as a proxy for inflation, and operational digitalization adoption indicators. The empirical model demonstrated exceptional explanatory power with an Adjusted R² of 0.975, indicating that the majority of variations in airline financial performance are explained by these three variables. Empirical results indicate that jet fuel prices and inflation rates have a positive and statistically significant effect on the financial performance of LCCs, with significance values of 0.003 and 0.004, respectively. This reflects the airlines' capability to mitigate cost pressures through fare adjustments and operational efficiencies. Conversely, operational digitalization has not yet demonstrated a statistically significant impact on financial performance (p-value 0.762), suggesting that the financial benefits of digitalization tend to materialize in the long term. These findings confirm that the sustainability of LCC financial performance in Indonesia is primarily driven by energy cost dynamics and macroeconomic conditions, whereas digitalization functions as a strategic investment with delayed financial returns.