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Air Niugini says it may be forced to withdraw from Sydney and downgrade its Brisbane flights from widebody to narrowbody aircraft should the proposed new codeshare arrangements with Qantas not receive the approval of Australian regulators.
In July, Qantas announced plans to end flights between Cairns and Port Moresby, currently operated by QantasLink Q400 turboprops, and launch a daily Brisbane-Port Moresby service with Boeing 737-800s.
The change, which Qantas said was to better serve the business market, was due to take place on October 30.
Currently, Qantas and Air Niugini have a codeshare arrangement where the Australian carrier adds its QF airline code on the PNG carrier’s flights from Port Moresby to Brisbane and Sydney.
There is no codesharing on the Cairns-Port Moresby route, where Qantas operates up to 12 return flights a week with Q400 turboprops and Air Niugini operates up to 11 return flights a week with Fokker 70 jets.
The codeshare is conducted on a free sale basis, where both carriers, independent from the other, set their own prices, set their own fare classes and rules, operate independent yield management systems and sell through independent sales networks. Each carrier had access to the “whole seat inventory”. Decisions on routes and frequencies are made independent of each other.
On September 5, Qantas applied to Australia’s International Air Services Commission (IASC) to codeshare on the Cairns-Port Moresby route under the same free sale basis as part of an updated agreement to reflect the Australian carrier’s network changes to Papua New Guinea.
In a supplementary submission dated September 14, Qantas said codeshare arrangements with Air Niugini had been in place since 1987 and were “instrumental in maintaining and growing air services in a historically challenging market, dominated by corporate traffic flows, with relatively limited opportunities for tourism growth”.
“Against this background, the codeshare arrangements have delivered significant public benefits in the form of increased competition, efficiencies and lower operating costs, which have in turn provided a wider range of services and choice for consumers than could be provided by each carrier operating alone,” Qantas told the IASC.
“Air Niugini and Qantas have changed the structure of their codesharing arrangements on the Papua New Guinea route to a more sustainable model which better reflects the dynamics of the market and which will continue to provide public benefits to consumers.”
Qantas said Papua New Guinea’s Independent Competition and Consumer Commission (ICCC) approved the passenger codeshare and freight arrangements on the Brisbane and Sydney routes on August 19, with its application for Cairns currently under consideration by the ICCC.
Air Niugini said in its submission dated September 9 that rejection of the proposed new agreement would put pressure on its Sydney and Brisbane services, given the Australian carrier would no longer codeshare on those two routes.
On the Sydney route the airline said: “The immediate impact will be the loss of Qantas as a competing marketing carrier on this route, leaving Air Niugini as the only operating and marketing carrier.”
“There is also a material risk that, without the contribution of revenue from Qantas seat sales towards operating costs of Air Niugini’s services, Air Niugini will need to withdraw from the route as there is insufficient demand on the Sydney route to maintain an independent operation, which will mean that customers will not be able to fly directly between Port Moresby and Sydney.”
Meanwhile, Air Niugini said Qantas’s proposed daily 737-800 service between Brisbane and Port Moresby represented a capacity increase of 36 per cent on the route, which meant it would “not be sustainable for Air Niugini to maintain its current frequency of 13 return services per week in a shrinking market”.
“In the medium to long term, Air Niugini would be likely forced to substantially withdraw from operating widebody aircraft,” it said.
Should the codeshare arrangements be approved, Air Niugini said it planned to increase its Cairns-Port Moresby offering to double daily with a combination of Fokker 70 and Fokker 100 equipment after Qantas’s flights ended.
The PNG flag carrier also intended to boost its Sydney schedule to three flights a week, from two currently. However, the airline flagged an undisclosed reduction from the current 13 flights a week to Brisbane with a combination of 767s and 737s once the Qantas service began on October 30.
“Following the introduction of an additional seven weekly return narrowbody flights by Qantas on the Port Moresby to Brisbane route, it will not be commercially sustainable in a shrinking market for Air Niugini to continue to operate 13 return services weekly on that route,” Air Niugini said.
“With the proposed codesharing, Air Niugini will be able to continue to operate widebody services on the Port Moresby to Brisbane route.
“This is because Qantas’s support (via its extensive Australian and international customer network and customer base which mean that it is able to sell seats on Air Niugini’s services which Air Niugini could not sell on its own) is critical to Air Niugini’s ability to achieve sufficient passenger loads and frequency of services on its Australian routes to make widebody aircraft operations viable.”
The number of weekly flights Air Niugini said it would be able to operate to Brisbane was redacted from the public version of its submission posted on the IASC website.
Air Niugini said the proposed codeshare would “generate competition in fares between Qantas and Air Niugini on the Cairns, Sydney and Brisbane routes, which will likely result in greater customer choice and lower fares than in the absence of the proposed code sharing”.
“Air Niugini and Qantas will continue to be competitively constrained by strong competition from Virgin, which Air Niugini expects will continue to operate 6 return flights weekly between Port Moresby and Brisbane,” Air Niugini said.
The PNG carrier’s submission also noted Qantas was “willing to agree” to Air Niugini codesharing as a marketing carrier on connecting Australian domestic flights between Brisbane and Melbourne, Brisbane and Perth, Sydney and Melbourne, and Sydney and Perth.
“Air Niugini considers that there are strong grounds for the IASC to grant the proposed variation, on the basis that it is likely to result in significant public benefits, relative to the likely situation if the Proposed Variation is not granted,” it said.
The closing date for submissions to the IASC was September 30. Virgin Australia, the only other operating carrier between Australia and PNG with six return Brisbane-Port Moresby flights a week, told the Commission on September 9 it intended to lodge a submission in response to the application.
The Qantas and Air Niugini submissions can be read in full on the IASC website.
Ben
says:Having been taking the 767 from BNE to POM for the last 12 months I too would be pretty concerned for Air Nuigini if the agreement is rejected. On basically every flight I take the plane is about half full, if that. If Qantas can’t sell seats on Air nuigini metal those loads will plummet further which is a bad thing for PNG’s struggling airline….