Papua New Guinea's Independent Consumer and Competition Commission (ICCC) has refused to greenlight a proposed codeshare between Air Niugini (PX, Port Moresby) and Philippine Airlines (PR, Manila Ninoy Aquino International) on the Port Moresby-Manila Ninoy Aquino International route because it would stifle competition thus negatively impacting travellers, The National newspaper has reported.

Commenting on the deal, the ICCC's Commissioner and Chief Executive Officer (CEO), Paulus Ain, said: "The ‘free sale’ codeshare 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.”

The ICCC noted that some key considerations and reasons for declining authorisation were:

  • The market was already competitive, given Philippine Airlines' (PAL) current average passenger market share of 44%, an increase in capacity on the route and a substantial reduction in fares following PAL's entry;
  • Current market data on the route indicates that there is potential for further traffic stimulation;
  • The total of 9x weekly flights (four from PAL and five from Air Niugini) on the Port Moresby-Manila route is sufficient to maintain or improve the current level of services enjoyed by travellers in both countries;
  • The structure of the proposed codeshare agreement did not impose any significant costs on the airlines associated with unsold capacity, as distinct from a “hard block” basis wherein each airline would commit to a certain level of capacity on the other’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;
  • The projected increased revenue for Air Niugini did not include information on how the carrier had been faring on this route. Air Niugini also did not demonstrate how any increased revenue would translate to public benefit. PAL also contended that joint marketing costs would be substantial and would be likely passed on in terms of increased fares;
  • Other market conditions, such as access to slots at Port Moresby and the existing airline designation and capacity requirements in the bilateral agreement between Papua New Guinea and the Philippines, would hinder the potential new entry of an airline.

According to the ICCC website, Air Niugini recently applied for a similar 'free sale' codeshare with Cathay Pacific (CX, Hong Kong International) for three years on the Port Moresby-Hong Kong International route which Air Niugini currently operates 3x weekly using a B767-300(ER). The ICCC will issue its final determination on the codeshare on January 27.