The government of Papua New Guinea has ramped up connectivity efforts, with strategic agreements and infrastructure investments expected to increase international arrivals in the coming years.
Regional Centre
In early 2017 the Asian Development Bank (ADB) and PNG’s National Airports Corporation (NAC) signed a transaction advisory services agreement to build a new international passenger terminal at Jacksons International Airport in Port Moresby under a public-private partnership (PPP) model. While the ADB has been a key development partner to the NAC under the landmark Civil Aviation Development Investment Programme (CADIP), the new initiative will be the ADB’s first advisory engagement under a PPP model in PNG, and it is expected to help the airport become a regional centre for air traffic in the Pacific (see overview).
The agreement will see the private sector design, build, operate and maintain the airport. Infrastructure enhancements at the terminal will include an extension of the main runway, helping the airport meet projected passenger growth up to 2040. As of mid-2018 the NAC was in charge of 22 airports, 14 of which could handle jet aircraft, with the remainder primarily used by propeller-driven planes. In addition to the PPP project, in the first quarter of 2018 the ADB was supporting the government in works to improve 21 national airports under the CADIP. However, some of the larger airports have deteriorated in recent years due to an overload in the capacity and size of air traffic. While there is still work to be done, the CADIP has made notable progress in repairing numerous runways and improving infrastructure.
For the most part, an improved network of airports, international routes and carriers, and a new fuel terminal will support the anticipated higher inflow of travellers during the APEC Lenders’ Summit in November 2018. “The downstream aviation sector remains robust, even though it lost momentum during the PNG LNG development phase, which involved very large air freight inflows,” Simon Robilliard, CEO of Pacific Energy Aviation (PNG), told OBG. “PNG’s national carrier Air Niugini is expanding international routes, and there are also new inbound global carriers such as Philippine Airlines. A new fuel terminal is also currently nearing completion in time for APEC 2018.” The summit is projected to have positive knock-on effects for trade and investment, as business leaders engage with their counterparts across the region. Furthermore, the country will be able to use the attention from the event to showcase its assets, while increased flight, hotel and restaurant bookings are expected to raise the performance of the tourism sector (see Tourism chapter).
Code-Share Agreements
In addition to strengthening airport infrastructure, several code-share agreements have been made in recent years to expand connectivity between PNG and the Asia-Pacific region. With much of the country inaccessible via roads, Air Niugini has played a key role in maintaining internal connectivity, offering services to 25 airports in PNG and expanding its international services in recent years. Meanwhile, local competitor PNG Air serves 25 airports in the country, flying some 22,000 hours per year, and carrying 19,500 passengers in 2017 on its fleet of seven ATR 72-600 aircraft and 10 Bombardier Dash-8 100 aircraft.
In January 2018 the Independent Consumer and Competition Commission (ICCC) – PNG’s principal economic regulator and consumer watchdog – proposed that Air Niugini be permitted to continue its code-share agreements with Air Vanuatu and Solomon Airlines for another three years. While the free-sale arrangement prevents aggressive competition between the parties in terms of airfares as well as other products and services, the ICCC believes that this will promote activity within aviation due to increased traffic volumes from the Asia-Pacific.
Weighing expected public benefits against likely detriments, the ICCC officially authorised the three-year extension in February 2018, concluding that the agreements would bring about more common good than weakening of competition. In the ICCC’s formal authorisation released on February 7, 2018, the major public benefits cited were the strengthening of trade and bilateral relationships between the member countries, route development, and the potential economic growth as a result of increased traffic volumes from Asia. The ICCC’s assessment also concluded that the extension of the code-share agreements is set to increase travellers’ choice of airlines to and from Asian destinations, as well as encourage the entry of competing firms in the longer term.
In further support of increased market competition, in June 2018 the ICCC approved a code-share agreement between Air Niugini and Fiji Airways for the route between Port Moresby and Nadi, Fiji. A first between the two carriers, the three-year deal is expected to increase traffic through Port Moresby, lower fares and prevent competition between the two airlines through the free-sale structure.
While the ICCC authorised the Air Vanuatu and Solomon Airlines code-share agreements with Air Niugini on the basis of overall public good, it also stated that it will not be possible for any new players to enter the market in the foreseeable future, as the route is thin and not considered profitable. The ICCC also reported that it was unclear whether the code-share schemes actually resulted in cost savings, and whether those savings would be able to sustain Air Niugini’s operations. The commission also mentioned that it was concerned about how potential savings would be passed onto travellers.
Australia-PNG Deals
According to a report by Australian Aviation Magazine in February 2018, Qantas Airways, the flagship carrier of Australia and its largest airline by fleet size, applied to expand its code-share agreement with Air Niugini on routes between Australia and PNG. The deals have been met with opposition from Virgin Airlines, the only other airline offering regular flights between Australia and PNG, operating five flights per week from Brisbane to Jacksons International Airport using Boeing 737-800 aircraft. However, the code-share arrangements have supported the viability of Air Niugini and boosted PNG’s economy in recent years by helping to facilitate trade, investment and tourism. According to Qantas, services between Australia and PNG had an average load factor of 52.2% in 2016 and 2017.
Qantas submitted an application to Australia’s International Air Services Commission (IASC) on February 16, 2018, requesting to add its code on Air Niugini’s non-stop services connecting Port Moresby with Cairns and Townsville, as well as a continuation of existing code-share agreements on the Sydney-Port Moresby route operated by Air Niugini, and the Brisbane-Port Moresby route operated by Qantas and Air Niugini. The IASC has previously allowed free-sale code-share arrangements on the Brisbane and Sydney routes in late 2016, but also barred Qantas from adding its code on Air Niugini’s Cairns-Port Moresby service.
Following the submission of the application in February, the IASC announced that it was planning to reject the request to maintain code sharing on the Brisbane and Sydney to Port Moresby routes, as well as Air Niugini’s flights from Cairns and Townsville to the PNG capital. According to the IASC draft determination, Qantas’ proposed free-sale code-share arrangement would reduce competition by increasing barriers to entry on the routes connecting Port Moresby with Cairns, Sydney and Townsville.
Port Management
Efforts to transform PNG into a regional centre for maritime trade took a major step forward in September 2017, when Philippines-headquartered port operator International Container Terminal Services Inc (ICTSI) signed a 25-year agreement with state-owned PNG Ports for the operation, management and development of the ports in Motukea and Lae. The arrangement will see local subsidiary Motukea International Terminal deploy cranes, berth and yard equipment for Motukea Port. Meanwhile, South Pacific International Container Terminal, another subsidiary of ICTSI, will offer similar provisions for Lae Port, the largest container-handling facility in PNG.
As the ICTSI has a track record of acquiring, developing, managing and operating container ports and terminals worldwide, this has been hailed as a critical step towards improving port-handling capacity, allowing the country to better capitalise on its position along major shipping routes between China and Australasia. To that end, the newly developed Motukea Port is expected to handle larger international vessels and facilitate trade with Australia, New Zealand, China, Japan and other regional markets. As a result, Motukea Port will have a greater capacity for services and shipping activity than Port Moresby.
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