Come Fly Air Nuigini’s Way

Back in 2007, I had this fantasy of Virgin perhaps buying a stake in Airlines PNG to create a company that could be called ‘Virgin New Guinea’. I then became more excited when Virgin did come to PNG but through a code sharing arrangement with Airlines PNG.

Competition in PNG’s airline industry since 2008 has played out quite well and we can all see the benefits of it today. However the code sharing arrangement fell abit short for me in terms of another airline taking on the domestic routes as well. Now with the possible Air Niugini and Airlines PNG merger in the mix we are faced with perhaps going two steps backwards before making any steps forward again.

The reasons against the merger are perhaps obvious and you can see a good round up of this here at Martyn Namorong’s blog.

It must be noted that this is the second time the merger has been proposed, the last being in August, 2010 so it appears that the management of both companies have on some level decided that this is the best strategy for both companies.

I for one actually support the merger but on two conditions, firstly that the government ensures that before it happens another sizable airline must be ready to commence operations in PNG and/or secondly, that some consolidation of the third level airline sector is achieved.

We already have several options if the will and right conditions are there:

1. Virgin has already been here, perhaps they could join forces with Travel Air (despite its political scar) for a code sharing arrangement.

2. Virgin or Tiger Airways or whoever could buy into Travel Air to take on the domestic market as well

3. The superfunds could consolidate existing third level airlines like MAF, Tropic Air and so on. For example PNG Sustainable Development Program bought an aircraft as a donation for MAF several years ago. Why couldn’t they just buy the whole airline?

4. If Tiensten as the former Planning Minister was able to give K10 million to Travel Air, then all third level airlines should have access to such assistance.

We only have to look at the timing of Virgin in Australia after Ansett’s nose dive to see what was possible after Ansett’s departure from 40% of the Australian market. Ansett like Airlines PNG had been around for a while but they simply could not make enough money after Virgin and Impulse entered the market, (QANTAS eventually acquired Impulse as well). Which seems to point to the analogy in PNG that Airlines PNG was perhaps never financially secure and that any new competition like Travel Air would have only crippled it further.

So it appears the merger is the only way to keep Airlines PNG alive or it will just have to be put into receivership. The lesser evil is perhaps to have it bought out by Air Niugini so that jobs and services are secured but again in the long run the merger needs to happen at the same time as the rest of the industry is changed.

The above steps are what the government could possibly do to in light of the merger and how if done correctly a vilable market can evolve like what happened in Australia.

Within Air Niugini itself there are further steps they could take as well to prevent a jump in operational costs should the merger go ahead, some that come to mind are:

1. Air Nuigini taking only major international and major domestic routes (and the aircraft and resources to do that), while the government or superfunds buy the smaller aircraft and its staff to use as equity to invest in existing third level airlines.

2. Air Niugini creates an aviation and avionics service company as a subsidiary with the additional  staff from Airlines PNG. This is due to the fact that most of Airlines PNG’s aircraft, even their Australian fleet were all serviced by PNG engineers in PNG. PNG could virtually become a service hub for aircraft in the region.

3. Like what QANTAS did by creating Jet Star to compete in the low cost airline market with Virgin, Air Niugini could also create another subsidiary for low cost travel on short trips around PNG or the region. Like no frills flights from Daru to Cairns maybe? Or a stripped down bus like service back and forth between Lae and POM or Lae and Hagen?

Put simply a merger does not have to spell the end of competition in our skies, but allot of detail needs to be explained as to what will happen not just with Air Niugini but also the rest of the industry for real competition to emerge from what could hopefully be a larger industry.


10 thoughts on “Come Fly Air Nuigini’s Way

  1. The market in PNG is so very much smaller than the market in Australia. Talair struggled, APNG struggles and Air Niugini struggles. How can another airline be expected to make a profit?

  2. Peter,
    why is that so,when much of PNG can only be reached by flying.I do not understand why when most people relie on it.Or are we so poor that even though there is a serivce operating we just affort to get on those balus every once in a while hence the airlines not making ends meet.

    1. Judy, lets face it doing any sort of business in PNG is expensive. By the time you pay for over the top expensive accom for most of your employees, give them a car, school fees etc and hire security guards to guard your assets you have spent far more than what a business in another country does. Then of course you have to donate to the local sports clubs, possibly even paying for petrol for the police to come and investigate a break and enter. On top of that you have to pay over the top prices for your telephone, electricity etc etc. Your cars breakdown because the roads are bad. Everything has to be imported and that costs more. If you ship it to the highlands some of it goes missing along the highway.

      If you are good and train your staff (at highly inflated training rates) thye move on to other companies and you have to start all over again.

      Should I go on or is that enough to say PNG is expensive. Flying is expensive. I hear that some of the airlines have to pay for airport maint, security and cleaning that should really be paid pay Civil Aviation.

  3. The PNG market is certainly smaller, but as Judy has pointed out why is this so when so much travel is dependent on air travel? It goes back to the familiar issue of the lack of infrastructure, i.e. airports which would reduce some of the costs borne by airlines in order to service towns and regions in PNG.

    Again we have the resources, its just about someone in power seeing the light to make things happen. For example we have a still young National Airports Corporation (NAC). The NAC’s role is to turn airports into business entities for the government. So through that vehicle they should be investing in upgrading airports across PNG to reduce the costs to the airlines.

    This would be akin to what the Macquarie Bank in Australia has done by buying airports around the world. In PNG’s case we would still need government and ADB money. etc. But as I’ve stated above a merger is all well and good, but the rest of the industry needs attention at the same time.

    On a third level airline view, NAC could work with local villagers to help look after airports and the villagers could also act as travel agents. The most appropriate villager would perhaps be one that has been running a trade store so that they would have the resources to provide this service. Post PNG actually runs their own travel agent service so if this trade store owner was an agent of Post PNG for example, they could collect mail, book tickets and hopefully hook up to Wide Area Network setup by Post PNG for all these services.

    Anyway just some dreaming at the moment

  4. Emmanuel,
    If what you explained briefly is what should be the way to go why hasnt it not happened?I have seen various governments come and go and gosh,little or nothing has been fortcoming for years to improve, our live style,and because of PNG’s terrain,this sholud have been of prime importance together with national or feeder roads all over PNG.
    The world wants to travel to PNG as they believe its one of the most beautiful unspoiled distinations but again the airfares and all the other infrasture is not there.
    I think something is drasticly wrong with “ol lain oli sindaun long sia long antap.It pains me when I see that the country is still the 3rd last on the world economic chart when so much is going for us!!!

  5. I’ll try and break it down for people to understand, the marge with air niugini is business deal gone wrong just go back two years ago when airlines png floated there campany on the POMXS (PORT MORESBY STOCK EXCHANGE). Monies was lost because of bad business interests airlines png conducted.
    The reason why the floated the company on the pomxs was to gain a new aircarft but since having acquiring a code shared agreement with virgin blue (now virgin austrlia) they didn’t need a purchase a new aircraft, Who knows what they did with the money only airlines png management knows (missmanagment). so getting back on topic someone made a lost on mismanagement airlines png caused and wants his money back if you can’t catch my drift then I wouldn’t say you are the brightest crayon in the box.
    With airservice in png just remember where all the processes are made (wagaini) trying to tap into png comes down to not what you know its who you know alot of intertests in png has gone to deaf ears if you ask me. Staying on topic of airservices look back 15 odd years ago with emarites trying to require air niugini. It was a win win for both parties air niugini will partner with what is now a dominate airline in the world but it all comes down to business interests the reason why emarites tried to aquire air niugini is because back then australia had no open air policy emarite would purchace air niugini and make a hub in port moresby just to tap into the australian market since but since we all know how business interests in png goes someone somewhere didn’t pull it off god only knows why so if you not getting the picture now I wouldn’t hire you as my own employee…..
    with air niugini and the falcon jet the government bought for air niugini to run a charter aircraft yes under the circumstance of the governments perfomanes in the eye of the public it looks bad.. yes i do understand where the people are coming from but in the eye of business it was a way of earning an income…. hence spend money to earn money… more revenue tax for dumbos but simple business practices if you ask me….. but who am i to judge nor give opinions to am i not god….. so i’ll it up to you the reader to ponder on this issue… thank you if you actually read my comment you are paying attention…

  6. I Don’t… I think if Airlines PNG was to be wound up 2 things would happen.

    1) Essentially the glaring faults and troubles with the PNG aviation industry would be forgotten or ignored for another few years until the next crash – maybe even an Air Niugini aircraft. Imagine hearing that on the news, “Fokker F100 goes down just outside Lae, killing all 100 people on board.”

    2) Air Niugini would be able to set whatever pricing structure they want. Remember, Air Niugini is owned by the PNG government and has been seen in the past as a nice little cash-cow for unscrupulous politicians… of which PNG has many. The price of a ticket to fly in PNG would be out of reach for almost everybody… and those who do pay for their ‘golden tickets’ will feel like they’re paying for them through their backside.

    The government needs to stop thinking that it’s the responsibility of the airlines to maintain the airports, uphold regulations and do it’s job! With regards to airports, I’m not just talking about POM, LAE, MDG. I’m also talking about the tiny little grass strips on the edge of cliffs PNG is famous for. All these airports, airfields and airstrips need to be looked after and developed. Aviation is always going to be a big part of how people get around the country. The geography alone insists on that! Not to mention the complete lack on any ‘real’ road network.

    Competition is key to keeping prices down and keeping PNGeans connected. Personally, I do think APNG has major problems in it’s organisation. You don’t loose several planes over several years by chance alone. Something’s going wrong. Is it maintenance procedures? Is it short-cuts? Is it an ageing fleet? Is it systemic? I don’t know. But APNG needs to be strengthened and kept alive – and not simply consumed by Air Niugini. Really, that is the dumbest, load of crap I’ve ever heard. APNG and Air Niugini merging is ridokulous. The airlines want to merger so the above points are taken care of. Air Niugini gets to control aviation in PNG (more so the cost of it), and Airlines PNG gets a nice little golden hand shake to disappear – making all their troubles about crashing aircraft and financial losses go away.

    I really hope things will turn out for the better for all parties, especially in the light of what has recently happen. Of course, safety must be key.

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