Air Niugini's request to codeshare with Phillipine Airlilnes denied
The Independent Consumer and Competition Commission (ICCC) in Papua New Guinea has refused Air Niugini’s request to codeshare with Phillippine Airlines on the Port Moresby-Manila route.
It believes the proposed codeshare would stifle competition which benefits travellers.
Commissioner and chief executive officer Paulus Ain said: “The ‘free sale’ code-share arrangement is not very competitive, hence, it will lessen the level of competition that currently exists in the market.
“The ICCC considers that in the present circumstances, it is better to have Air Niugini and Philippine Airlines continue to operate independently on the Port Moresby and Manila route,” he said.
Consistent with its draft determination which was released on July 11, 2019, the ICCC considered that, if the parties proceeded with the code-share arrangement, the public detriment resulting from this would outweigh the public benefit that currently exists while the two airlines operate independently.
With comments received from stakeholders and submissions on the draft determination from the parties, the ICCC assessed the application and was not satisfied that the proposed code-share agreement, if authorised, would result in more benefits to the public.
ICCC noted that some key considerations and reasons for declining authorisation were:
The market was already competitive, given the current average passenger market share of 44 per cent for Philippine Airlines and the increase of capacity on the route and a substantial reduction in fares following the entry of PAL;
The current market data on the route indicated that there was potential for growth in traffic volume;
The total of nine flights weekly is sufficient to maintain or improve the current level of services enjoyed by businesses and other travellers in both countries, using air services on the Port Moresby-Manila route;
The structure of the proposed code-share agreement did not impose any significant costs on the airlines associated with unsold capacity, as distinct from a “hard block” basis were each airline would commit to a certain level of capacity on the other airline’s flights;
A reduction in airfares to lessen the anti-competitive effect of the only two competitors in the market entering into the proposed agreement was unlikely under the proposed ‘free sale’ arrangement which was highly likely to exacerbate anti–competition the significant anti-competitive effects of the proposed agreement described therein, between the only two competitors in the market;
The projected increased revenue for Air Niugini did not include information on how Air Niugini had been faring on this route. Air Niugini also did not demonstrate how any increased revenue would translate to public benefit; and,
Philippine Airlines contended that joint marketing costs in aggregate would be substantial. If so, such costs would be likely to be passed on in increased fares.
The ICCC also noted some market conditions that could contribute to hinder potential new entry; that availability of limited slots at the Port Moresby Jackson’s International Airport could potentially inhibit new entries considering that despite the recent redevelopment at the airport, there was no evidence which suggested that slot availability had increased. Should demand grow for passenger (and freight) services for international flights, new carriers could enter the market and provide air transport services.
This is the matter for the National Airport Corporation to assess and take appropriate steps, if deemed necessary, to improve.
The ICCC also noted that regulatory requirements such as airline designation and capacity requirements as per bilateral agreements between PNG and Philippines could prove at times, to be challenging for a new carrier to enter.
SOURCE: THE NATIONAL/PACNEWS
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It believes the proposed codeshare would stifle competition which benefits travellers.
Commissioner and chief executive officer Paulus Ain said: “The ‘free sale’ code-share arrangement is not very competitive, hence, it will lessen the level of competition that currently exists in the market.
“The ICCC considers that in the present circumstances, it is better to have Air Niugini and Philippine Airlines continue to operate independently on the Port Moresby and Manila route,” he said.
Consistent with its draft determination which was released on July 11, 2019, the ICCC considered that, if the parties proceeded with the code-share arrangement, the public detriment resulting from this would outweigh the public benefit that currently exists while the two airlines operate independently.
With comments received from stakeholders and submissions on the draft determination from the parties, the ICCC assessed the application and was not satisfied that the proposed code-share agreement, if authorised, would result in more benefits to the public.
ICCC noted that some key considerations and reasons for declining authorisation were:
The market was already competitive, given the current average passenger market share of 44 per cent for Philippine Airlines and the increase of capacity on the route and a substantial reduction in fares following the entry of PAL;
The current market data on the route indicated that there was potential for growth in traffic volume;
The total of nine flights weekly is sufficient to maintain or improve the current level of services enjoyed by businesses and other travellers in both countries, using air services on the Port Moresby-Manila route;
The structure of the proposed code-share agreement did not impose any significant costs on the airlines associated with unsold capacity, as distinct from a “hard block” basis were each airline would commit to a certain level of capacity on the other airline’s flights;
A reduction in airfares to lessen the anti-competitive effect of the only two competitors in the market entering into the proposed agreement was unlikely under the proposed ‘free sale’ arrangement which was highly likely to exacerbate anti–competition the significant anti-competitive effects of the proposed agreement described therein, between the only two competitors in the market;
The projected increased revenue for Air Niugini did not include information on how Air Niugini had been faring on this route. Air Niugini also did not demonstrate how any increased revenue would translate to public benefit; and,
Philippine Airlines contended that joint marketing costs in aggregate would be substantial. If so, such costs would be likely to be passed on in increased fares.
The ICCC also noted some market conditions that could contribute to hinder potential new entry; that availability of limited slots at the Port Moresby Jackson’s International Airport could potentially inhibit new entries considering that despite the recent redevelopment at the airport, there was no evidence which suggested that slot availability had increased. Should demand grow for passenger (and freight) services for international flights, new carriers could enter the market and provide air transport services.
This is the matter for the National Airport Corporation to assess and take appropriate steps, if deemed necessary, to improve.
The ICCC also noted that regulatory requirements such as airline designation and capacity requirements as per bilateral agreements between PNG and Philippines could prove at times, to be challenging for a new carrier to enter.
SOURCE: THE NATIONAL/PACNEWS
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