Pacific Energy to acquire and manage aviation fuel distributor

The National Business

THE Independent Consumer and Competition Commission (ICCC) has allowed Pacific Energy Aviation PNG Limited to acquire 100 per cent shares of PNG Grounds Services Limited – a subsidiary of PNG Air.
Commissioner and chief executive  Paulus Ain said the decision was based on available information and taking into consideration comments and submission by stakeholders.
It concluded that the market most likely to be affected by the proposed acquisition was the retail supply of aviation fuel in PNG.
The ICCC concluded that:

  • There are currently three aviation fuel distributors in the country – Puma Energy, Pacific Energy Aviation Limited (PEAL) and PNG Ground Services Ltd (PNGGS). While the proposed acquisition will reduce the number of aviation fuel distributors to two, it will not have any significant impact on current level of competition in the market because PNGGS has been predominantly supplying only its parent company, PNG Air;
  • Although PNGGS is in the market for the retail supply of aviation fuel, the proposed acquisition, if it proceeds, will not remove a sustainable, effective and vigorous competitor because PNGGS is currently not a vigorous and effective competitor;
  • The proposed acquisition, if it proceeds, will not have any significant impact in terms of further increasing the entry and expansion of barriers. This is because PNGGS has been a small player, only focusing on serving PNG Air. Hence, its acquisition will not significantly alter the structure of the market;
  • There is a possibility of import competition through “tinkering” which will put pressure on local suppliers to lower their prices; and,
  • The proposed acquisition, if it proceeds, will not result in vertical integration as  PNGGS and PEAL are not vertically integrated in the aviation fuel industry. They are only retail suppliers of aviation fuel. Puma Energy is the only wholesale supplier of aviation fuel in PNG that is also a vertically integrated firm in the market.

Ain said: “Allowing this transaction to go through will enable PEAL to branch out to other domestic airports as oppose to only operating out of Jackson Airport as is the current case.”