Subsidise freights

IN applied economics, a government investment decision is normally based on what is termed as socio economic cost and benefit analysis.
It looks beyond the normal financials on profit and loss statement to make a decision in a market failure situation like what we have in PNG – rugged geographic terrain and isolated pockets of communities in dire need of all forms of services.
Certain airline routes are not profitable to cover for the return cost of a flight compared to other major domestic hubs of the country.
It is therefore a responsibility of the State to provide direct or cross subsidies to uneconomical routes as part of its community service obligation through its national airline or partnership with private airline operators in the country.
Subsidies can come in a form of fuel, freight or annual fixed budgetary grants to qualifying operators.
PNG is a challenging country geographically and airline services should always be factored into the development budget beyond 2021.
The rehabilitation of rural airships should be supported in a big way to bring services to the isolated communities.
For PNG, it cannot afford to allow any of its existing airlines to go bust in this Covid-19 period.
It has no choice but to bail out via a subsidy or by direct share ownership and injection of working capital or soft loan whether it’s Air Niugini, Link PNG or PNG Air and other third level operators.

LG