THE aviation sector in Papua New Guinea is set for a major shake-up, with government plans to privatise a stake in the national flag carrier, Air Niugini, later this year.
This should support Port Moresby’s growing role as a regional air traffic hub, as new routes are added and more airlines extend services to the capital.
Last September the government announced it would offer a stake of around 50% in Air Niugini to private investors, a plan confirmed earlier this year by prime minister Peter O'Neill, who said the sale would begin towards the end of 2015.
The partial privatisation is part of broader divestment of state enterprises, O’Neill told local press in March, with mining, utilities and logistics assets also set to be put on the market.
This is not the first time that privatisation of the national carrier has been considered. In 2012 officials cancelled bidding on a 49% stake in the airline, citing a global contraction in industry profitability, while an earlier plan floated in 2001 did not elicit strong investor interest.
However, the latest bid to take Air Niugini public is expected to adopt a different model, with domestic investors rather than foreign carriers initially targeted for the sale, according to O’Neill.
He told local media in March that while investment organisations and development partners had expressed interest, local investors would be given priority in the sale.
“We will give preference to PNG-owned entities,” he said. “But if they do not take up all the options, of course it will be available to other investors.”
Air Niugini is also more likely to find suitors – domestic or foreign – than before, thanks to its stronger position as a regional carrier with an expanding network.
The airline accounts for nearly two-thirds of all weekly seats offered on domestic and international routes, with a carrying capacity of around 40,000 passengers – nearly three times that of its nearest competitor, Airlines of PNG, according to a report issued by industry publication Anna Aero in mid-July.
While the report noted just a 1% year-on-year increase in industry-wide carrying capacity in July, this is set to change in the second half of the year.
Most recently, Air Niugini launched a new route from Port Moresby to the Vanuatu capital of Port Vila, via Honiara in the Solomon Islands, in late June, as part of a broader plan to extend its reach in Oceania.
A re-fleeting program is supporting the expansion, with seven Fokker 70s to replace the carrier’s six Bombardier Q400s in the next two years. The aircraft should expand Air Niugini’s range and capacity, allowing it to increase its reach beyond the 26 domestic and 11 international destinations already served.
According to the company’s chairman, Frederick Reiher, the re-fleeting is part of a wider effort to increase the airline’s footprint and raise the profile of Port Moresby as an aviation centre.
“For the international network, a key strategy for Air Niugini is to promote Port Moresby as a gateway to the Pacific and Asia – a regional hub – by linking airports in Asia with airports in the Pacific Islands and Australia,” he told Oxford Business Group.
“This means increasing the frequency of services to key destinations such as Singapore, Hong Kong, Manila, Denpasar and Narita, with coverage to be extended to China in the future.”
Meanwhile, competition is heating up, as new carriers enter the regional market, challenging Air Niugini’s dominance on certain routes.
Philippines Airlines (PAL) will begin serving the Manila-Port Moresby run in October, offering two flights a week, alongside the four flights currently operated by Air Niugini.
According to PAL’s president and COO, Jaime Bautista, the country’s expanding economy, forecast to record the highest GDP growth in the world this year, has underscored its appeal as a destination.
“The robust investment climate and the upsurge of business travel to and from PNG make it ideal for PAL to open services between Manila and Port Moresby,” he told local press in June.
Another recent entrant to the market, Air Tahiti Nui, began operating flights on the Port Moresby-Papeete route at the end of June, further strengthening the capital’s position as a regional air traffic hub.