Airline gets authorisation on code-share deal

The National Business

THE Independent Consumer and Competition Commission (ICCC) has granted authorisation to PNG Air Ltd (PNG Air) for a code-share agreement it is entering into with Virgin Australia for services between Port Moresby and Brisbane.
After stakeholders input and submissions, Independent Consumer and Competition Commission assessed the application and was satisfied that the code-share services, if authorised, would generate more benefits to the public which are likely to outweigh any disadvantages, including lessening of competition.
Commissioner and chief executive officer Paulus Ain, while acknowledging that a free sale code-share arrangement was competitive, said the arrangement would allow a new carrier to enter the market.
“The ICCC considers that in the present circumstances, it is better to have PNG Air start its international operations on the Port Moresby-Brisbane route on a free sale arrangement,” Ain said.
He said consistent with its draft determination which was released on Feb 1, ICCC considered the following potential public benefits likely to result if the parties provide the code-share services (despite likely anti-competitive outcomes):

  • Travellers’ choice (of marketing carriers) would be increased (from three – currently Qantas, Air Niugini and Virgin Australia – to four);
  • travellers would have access to cheaper and more frequent passenger air services between PNG and Australia;
  • passengers would benefit from direct connections and ease of luggage transfers for connections to and from PNG Air’s domestic services;
  • further development of the route, making Port Moresby a transit hub as passengers from other Pacific nations such as Federated States of Micronesia travel to Australian ports via Port Moresby and vice versa thus, increasing traffic volume through Port Moresby making possible more frequent services, reducing passenger flight times to Australian destinations, and leading to cheaper fares in the long run as a result of increased passenger volumes;
  • as the competitive pressure builds up and more public benefits are realised, it would lead to increase in traffic volume; hence, the possibility of other airlines entering the market by code-sharing or independently after airline companies provide aggressive competition on this route; and provision of direct services on a high frequency basis;
  • indirectly, the code-share arrangement has the potential of increasing competitive pressure between Air Niugini and PNG Air in the domestic market and would lead to benefits such as reduced airfares and better services for domestic consumers; and,
  • The above could increase traffic volume through Port Moresby, and make it possible for more frequent services, reduce passenger flight times to Asian destinations, possibly leading to cheaper and special fares in the long run.

On the other hand, ICCC also noted that the following detriments were likely to occur:

  • The “free sale” arrangement was not likely to stimulate sufficient competition between PNG Air and Virgin Australia; and,
  • The code-share agreement would diminish the chances of independent entry by PNG Air.

Ain said ICCC had also noted some market conditions that could contribute to hinder expansion like the availability of limited slots at Port Moresby Jackson International Airport, could potentially inhibit new entries.
ICCC considered that despite the recent redevelopment at the Jackson Airport, there was no evidence which suggested that slot availability had increased.
“Should the demand grow for passenger (and freight) services for international flights, new carriers may enter the market and provide air transport services.”