Rumours of an airline merger

Author: Ilya Gridneff for AAP

HONIARA, Aug 18 AAP – There are concerns in Papua New Guinea that Qantas flights to Port Moresby are threatening the survival of PNG’s second biggest carrier Airlines PNG (APNG).

The Australian airline entered into the PNG market in July hoping to capitalise on the country’s $16 billion ExxonMobil-led Liquefied Natural Gas project.

A subsequent price war resulted in flights to Port Moresby from Cairns being cheaper than to Sydney. But since the Qantas entry, APNG has reduced its once daily Cairns-Port Moresby run to twice a week. Qantas, which has a codeshare agreement with state-owned national airline Air Niugini on flights to Sydney and Brisbane, has declined to comment on how this has affected APNG.

But a government letter, sighted by AAP, says “(There is) grave concern about the recent entry of Qantas into the Cairns-Port Moresby route. “The Qantas entry in its own right was forcing both national carriers out of the market and there could be removal of competition and higher prices as a result”. Meanwhile, several government sources have told AAP that APNG is seeking a merger with Air Niugini.

They said APNG and other private investors were lobbying to get a merger proposal through cabinet. APNG CEO Geoff Toomey, a former Air New Zealand CEO and before that Qantas deputy CEO and chief financial officer, declined to comment.
APNG spokeswoman Danae Jones did not deny the merger push but said the airline would not talk about “speculation and rumour”.
“Significant improvement in financial performance is expected for 2010,” she said.

However, Air Niugini CEO Wasantha Kumarasiri said a merger was not under consideration. “(Prime Minister Michael Somare) and our minister (Public Enterprises Minister Arthur Somare) have assured us they are dedicated to Air Niugini,” he said. A spokesman from the Prime Minister’s Office also played down the merger talk. “We hope sense will prevail,” he said.

The merger rumour comes in the same month APNG marked a year since one of its planes crashed en route to Kokoda, killing all 13 people on board, including nine Australian Kokoda trekkers.

In 2008, the Cairns-based Wild family sold a 50 per cent stake in APNG through a public float on the Port Moresby stock exchange for an estimated 100 million kina ($A40 million). John Wild remains the largest APNG shareholder with 47 per cent while his son, APNG chairman, Simon Wild, is also managing director of Wild family-owned Queensland-based regional airline Sky Trans.

Since the float APNG shares have dropped from one kina (40c) to 63 toea (25c). In the APNG 2009 annual report Mr Wild blamed the company’s 24.6 million kina ($A9.8 million) loss on the global economic downturn, the Kokoda crash and even the Icelandic volcanic eruption that grounded planes in the northern hemisphere. 

For the same period Air Niugini declared a profit of 68 million kina ($A27.2 million).

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3 thoughts on “Rumours of an airline merger

  1. We the public will be the winner,prices of airfares between distances will be cheaper.But if you are talking about a possible merger,then that will be a very different ball game altogether for the traveling public,I think.Somebody correct me if I am wrong in this matter.

    Monopoly is good for the traveling public,they get to have a choice.But like everything else in PNG the Government of the day will do their own thing NEVER Mind the people who eleced the in there.Remember its not only aliens who fly out of PNG,its us PNGs as well;the people of PNG.We cant afford fares into the other Provinces of PNG: because of the fares,but because of the monopoly between the three air lines the fares to Cairns or Sydney or Brisbane is kind of affordable to the average PNG person.

    I can only lament in silence,how long can we take this treatment from them!

  2. While a merger between APNG and ANG would give them greater muscle to fend off people like Qantas on the international routes, it would create a virtual monopoly on the domestic routes unless Qantas can come here and compete on the domestic routes as well.

    The government must be very careful in not allowing APNG to sink. Qantas and whoever else are here only for the money. But APNG has always been here with us through the thick and thin of it all. And they deserve some sort of protection from our government on their international routes so as not to force them into a merger situation with ANG which will be a step backward for the domestic market.

    Whatever happens to fares on the international routes, I want to see a reduction in the fares in the domestic routes. We can’t afford to not have competition on our domestic routes.

  3. With the country’s transport infrastructure in a doubtful state of repair, affordable domestic air travel is an essential part of economic growth and development. Public transport in many countries is subsidised to ensure those who can least afford to travel can indeed still do so. Why not extend this principle to a public air carrier one could well ask? The problem is that this concept creates the same dependent mentality as exists with the overseas aid debate.

    Public transport and government utilities have been paid for and subsidised by taxpayers for many years in Australia and yet successive governments have now sold or are selling these so called public assets back to the taxpayers, i.e. those who paid for them in the first place. The money gained from these asset sales then seems to disappear straight back into government revenue and creates no appreciable or identifiable benefit. What a classic travesty in conceptual thinking! The trouble is; the taxpaying voters have until recently, fallen for it. With GFC and returns from shares now at an all time low, suddenly public ownership of previous government utilities is now on the nose.

    The dilemma of how to keep commercial transport services going during a financial downturn is ongoing. Amalgamation is always a tempting alternative but as David correctly points out, how do you then stop a monopoly from developing and then squeezing the market? Legislate fare level rises perhaps?

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