The Independent Consumer and Competition Commission (“ICCC”) has proposed to grant authorization to PNG Air Limited (PNG Air) to give effect to a code-share agreement it has entered into with Virgin Australia for services between Port Moresby, PNG, and Brisbane, Australia.
Commissioner and Chief Executive Officer, Mr. Paulus Ain said, “Whilst acknowledging that free sale code-share arrangement is not very competitive, the arrangement will allow a new marketing carrier to enter the market. The ICCC considers that in the present circumstances, it is better to have PNG Air start with the free sale arrangement.”
The ICCC has considered that the following public benefits that are likely to result if the parties provide the code-share services:
- Travelers’ choice of marketing carriers would be increased (from three (3) to four (4) as currently there are 3 airlines operating on this route, being Qantas, Air Nuigini and Virgin Australia);
- As a result of increased competition, travelers’ would benefit from competitive airfares and more frequent passenger air services between PNG and Australia;
- Direct connections and ease of luggage transfers for PNG Air’s domestic services;
- Further development of the route and making Port Moresby as a transit hub as passengers from other Pacific nations such as Federated States of Micronesia use Port Moresby as a transit hub to travel to Australia;
- The possibility of other airlines entering the market as independently operators or by code-sharing as a result of aggressive competition on this route by the 4 airlines; leading to further route development in the long run;
- The code-share arrangement has the potential of increasing competition between Air Niugini and PNG Air in the domestic market and would lead to beneficial effects such as reduced airfares and better services for domestic services; and
- This would increase traffic volume through Port Moresby, making it possible for more frequent services. This outcome would also lead to competitive and special fares in the long run as a result of increased passenger volumes.
On the other hand, the ICCC noted that the following public detriments are likely to result; however, these are outweighed by the mentioned public benefits:
- Infrastructural barriers such as the availability of slots at the Port Moresby Jackson’s International airport. The ICCC considers that despite the recent redevelopment at the Jackson’s Airport, there was no evidence which suggested that slot availability was increased. Should demand grow for passenger and freight services for the international flights, new carriers may also enter the market and provide air transport services. The unavailability of slots would hinder the entrance of the airliners. This would prevent potential competition on the incumbents.
- Regulatory requirements such as airline designation and capacity requirements as per bilateral agreements between PNG and Australia can prove at times, to be a barrier to entry. Before an airline could operate international services to another country, the government must first negotiate a treaty level agreement with the destination country’s government. PNG has a bilateral Air Service Agreement (ASA) with Australia. Under the ASA, requirements such as traffic rights, capacity, designation, ownership and control, other policy, safety and security clauses would be included. Such regulatory requirements can act as a barrier to entry and hinder effective competition.