Challenges to aviation industry

Focus
Worldwide, the aviation industry has been hit hard by the Covid-19 pandemic. PNG is no exception. Despite domestic routes being opened for travel, both domestic and international travel to and from PNG has been
affected, DESMOND NARONGOU writes
Air Niugini’s Captain Beverly Pakii (right) and her first officer Taylor Yama (left) with their cabin crews.

On May 22, the State-owned airline, Air Niugini, through its subsidiary Link PNG, submitted a proposal to the PNG consumer watchdog, the Independent Consumer and Competition Commission (ICCC), to acquire about 40 per cent of shares in its rival, PNG Air.
These were shares held by the superannuation fund Nasfund, which had agreed to sell them to Link PNG.
Nasfund released an unfavourable assessment of PNG Air when it announced its decision to sell its shares.
It said it had not received a single dividend payment from PNG Air since its initial investment 12 years ago and that PNG Air’s share price had dropped from its initial value of K1 per share to only 2 toea per share before its suspension from trading on the PNG Stock Exchange in 2018 (for non-submission of annual accounts).
Nasfund didn’t hold back, describing PNG Air as a “non performing, illiquid and non-yielding investment”.
Air Niugini’s managing director Bruce Alabaster delivered a similarly negative verdict, noting that “PNG Air has lost K93 million over the last four years and now has K143 million in carried-forward losses”.
He promised that PNG Air would be “retained as a separate corporate entity”, that prices would not be increased and that, no jobs would be lost.
However, ICCC was not impressed and rejected the proposal.
In a media statement on Sept 10, ICCC general manager Brian Ivosa stated the obvious that this sale of a large ownership stake in one of two airlines in PNG to the other would not only harm competition, but would create a monopoly, resulting in higher prices and worse services.
Others have been sceptical, with Opposition MP Richard Maru questioning why Air Niugini would want to buy a loss-making airline.
State Enterprises Minister Sasindran Muthuvel conceded that the Government-owned airline was itself loss making and suggested that the share purchase hadn’t yet been approved by the National Executive Council.
What PNG is facing it not unique.
Airlines around the world are bleeding cash.
In Australia, Virgin Australia, the second major airline declared bankruptcy in April.
What is different about the PNG situation, however, was the fragile state of the country’s two airlines before the pandemic.
The challenge in PNG was not to restore the health of the country’s two airlines, but to tackle longstanding problems that have debilitated the sector.
If crisis is good for reform, then the time for reform in PNG’s aviation sector is now.
Tough decisions would be needed by both airlines and by the Government.
If reforms were undertaken, the Covid-19 would be looked on as a period of pivotal change for the industry.
If this opportunity was missed, the Covid-19 could be one blow too many for a sector that was in deep trouble before the pandemic.
There was no time to waste introducing major reforms to guarantee the long-term survival and health of the aviation sector.

This article appeared first on Devpolicy Blog https://devpolicy.org  from the Development Policy Centre at The Australian National University. It is part of the Covid-19 and the Pacific series.

Desmond Narongou is a graduate in information technology from the PNG University of Technology, and currently works with the National Airports Corporation.

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