Provisional thumbs down for Link PNG, PNG Air merger

A proposed Joint Operating Agreement between Papa New Guinea’s Link PNG (Port Moresby) and fellow domestic carrier PNG Air (CG, Port Moresby) is likely to be turned down for competitive reasons, while a proposed code-share between the two airlines may only be authorised with amendments to limit anti-competitive effects.

This is according to a draft determination by the country’s Independent Consumer and Competition Commission (ICCC), which has invited submissions from stakeholders and the public before making a final decision on the matter.

This followed an application by Link PNG lodged on April 9, 2021, for authorisation to enter into a JOA which would include a code-share agreement with PNG Air for a period of five years.

According to an ICCC statement, the JOA would include coordination of flight schedules, fleet allocation, operational and maintenance of services, and charter airline operations between the two airlines in the domestic market, covering scheduled and charter flights, as well as domestic air freight services. Link PNG’s proposed code-share agreement would be on a free-sale basis.

ICCC Commissioner and Chief Executive Officer, Paulus Ain, said the regulator had provisionally determined that the code-share should only be conditionally authorised with amendments that would minimise likely anticompetitive effects and to ensure that the two airlines continued to compete in the long term.

“The ICCC has considered that the proposed JOA should not form part of the authorisation, because it constitutes an unjustifiable intrusion by Link PNG into the management of PNG Air such that the former would gain decision-making control over key aspects of the strategy, operations and, consequently, the financial structure of the latter and, therefore, would be likely to substantially lessen competition and result in greater detriment than benefit to the public,” the ICCC found.

Ain added that the ICCC proposed to grant authorisation with conditions to Link PNG and PNG Air to enter into and give effect to the proposed code-share only including, but not limited to, the removal of the proposed JOA from the proposed arrangements.

Link PNG’s application to acquire 40% of Nasfund shares in PNG Air was still going through the normal competition assessment process, Ain advised. As previously reported, Link PNG in April renewed plans to acquire a minority shareholding in PNG Air just over six months after the ICCC had rejected an initial application on the grounds it would cause “serious harm” to the level of competition in the country’s domestic market.