Until only a few short years ago, this ambition of the 38-year old state-owned carrier would have not only seemed impossible, but probably would have been as well. Air Niugini’s current CEO, Wasantha Kurasiri came on board nearly four years ago and from that point began the development of the carrier that now uplifts over a million passengers and 11,000 tonnes of cargo each year with a fleet of 21 aircraft.
Owing to the nature of the country – extremely rugged and mountainous with virtually no road network connecting its cities – the carrier is in an enviable position of being virtually the only means of transport to much of the country’s hinterland. The small size and basic infrastructure of country naturally leads to a fleet comprised of smaller aircraft for its domestic routes, including Fokker 100s, Dash 8 Classics and three new Q400s.
“As the Nation’s flag-carrier, we have a fundamental obligation to serve the people of Papua New Guinea – especially since the country lacks national road and rail infrastructure. This creates unique, wonderful operational challenges for the airline and it may be one of the few countries in the world that has really developed off the back of an airline,” says Kumarasiri.
As part of its international expansion it recently added three B767-300ERs leased from Icelandair which mark the starting point of its international expansion which will get a further boost in 2014 when it takes delivery of a solitary B787 Dreamliner.
Currently the carrier operates widebody B767 passenger services to Tokyo, Hong Kong, Manila, Malaysia, Singapore, Australia, Fiji and the Solomon Islands. Due to the historic and important economic ties between Australia and PNG, the carrier has direct daily flights to Brisbane and Cairns and twice a week to Sydney.
The PNG story Most readers would likely have, at best, a vague notion of this small country of Papua New Guinea (PNG). For those that do have an inkling, they would possibly think of its historical head-hunting tradition, its chronic underdevelopment, or the recurring violent secessionist revolt that claimed tens of thousands of lives from 1975- 1997 on Bougainville Island.
But the winds of economic change sweeping through Asia have also swept into PNG and the country and its culturally diverse seven million population is now facing a new era and brighter future. Much of this is due to its rich endowment of natural resources including oil and gas, copper and gold – which together now account for 72 per cent of PNG’s export earnings.
A new key factor to its nascent economic growth is a massive LNG project being undertaken by Exxon Mobile. Kicked off in 2009 with a target of the first LNG cargo in late 2013, or early 2014, the project has a predicted production lifetime of nearly 30 years and will entail major infrastructure development.
The positive economic outlook for the country was signalled as early as late 2008 when the International Monetary Fund noted that “a combination of prudent fiscal and monetary policies, and high global prices for mineral commodity exports, have underpinned Papua New Guinea’s recent buoyant economic growth and macroeconomic stability.” The IMF went on to note that real GDP growth, at over six per cent in 2007, would likely continue to be strong in the coming years.
Cargo focus
This of course is all good news for the national carrier both on the passenger and cargo sides of the business. Indeed, a new era for Air Niugini kicked off earlier this year when Kumarasiri brought on board Nalin Rodrigo – as regional manager for Asia Pacific & Americas – who many in the industry will know from his cargo tenure at Emirates SkyCargo and more recently Sri Lankan Cargo.
“They are investing in all these aircraft and also going to build a cargo centre, meaning there is quite a lot of investment going into freight, including investing in Emirate’s SkyChain cargo system. There is a fair bit of focus on freight at Air Niugini at the moment and with all this investment going in, they needed a cargo specialist,” Rodrigo says, explaining his joining Air Niugini Cargo.
The optimism for growth in both the passenger and cargo side is clearly well-founded in this increasingly natural resourcehungry world. Three or four major mining projects are in the works which along with the current LNG project are firing the PNG economy and driving both domestic air cargo demand and the necessary international cargo links.
Resource driven cargo demand
“What is really changing PNG is this LNG project – it’s a massive investment by Exxon Mobile and its actually making a lot of difference in the day-to-day lives of people and the economy in various ways,” Rodrigo says, pointing to hotels being expanded, new hotels being built, roads being built and so on. For the national carrier it’s translated into expansion in order to meet the demands of bringing in the people who work at the mining and LNG projects along with the equipment and supplies. “A lot of things are happening as we speak,” he adds.
In the last year he notes all the camping site material like housing and other infrastructure was flown into the various camps with the carrier now doing charters into those camps with the various supplies like food and fresh vegatables and fruit from the main cities of Lae and Port Moresby.
Supplies for the mining business come mainly from Australia’s Queensland while materials like components and chemicals generally come by ship from the US and Western Australia. And once in Port Moresby there’s only one option to get it anywhere else in the country – by air. He added that equipment will also be coming from Texas and “while we do not participate fully yet, we do anticipate participating in that the movement as well.”
Clearly the LNG project will be a boon for air cargo, particularly considering the lack of road and rail infrastructure in the country. Rodrigo notes that while much of the cargo needs for the LNG project were originally planned for sea freight, delays and other urgent needs pretty much guarantee a significant spill over for air freight.
“So we anticipate there will be significant cargo movement,” he says adding that the project will also entail building a new runway at Moro. “That airstrip will be built for the LNG project and they plan to bring in some serious material which has to be air freighted from Port Moresby into Moro, most likely by an AN124-type of aircraft,” he says.
This will come together in about a year’s time, by next August he says, along with some expansion at Port Moresby airport as well. “So we see this growth and we are also planning our own expansion and partnership with various operators,” says Rodrigo.
“We are partnering with them for these projects and are charting aircraft from various other suppliers on an ad hoc basis – this is not what we do normally , but we will get involved in this project as a serious player as well,” he says.
Other expansion plans in the works include a new cargo centre to replace the current facility which was the old Ansett cargo terminal. Ansett along with Qantas and Trans Australia Airlines were the original investors along with the PNG government in Air New Niugini. “It’s a tiny building built 30- 40 years ago which handles both domestic and international cargo movements so it’s quite cramped.” The additional space will come from a converted hangar that will double the 11,000 tonnes per annum currently handled once it’s completed in two to three months.
The ‘flying truck’
In the meantime the carrier continues with its domestic operations which are crucial for getting supplies inland from Port Moresby. “We have a very difficult terrain to get to the various cities. Some are in the islands, some in the highlands, so the road network is not as developed as we would like it to be so there is a major demand for air lift of materials which we use our four tonne capacity Dash 8 small freighter like a truck – we go at least twice a day to Lae to Mount Hagen delivering newspapers, vaccines, medical supplies, fruit and vegetables and bring back fruit and vegetables. It is like a little truck that goes up and down,” he says with a laugh, adding that around a tonne of belly cargo is also carried on the airline’s linehaul flights.
The carrier also moves various domestic export products both to Port Moresby and beyond, including ornamental fish for the US market, crocodile skins, wood and mineral samples, gold on special charters and limited fruit and vegetables. Imports consist mainly of medical supplies, spares and parts for the aviation, mining and energy sector as well as supplies for the tourism and hotel industry.
As for competition, Rodrigo says there is one B737 freighter operator – Pacific Air Express – which operates weekly flights between Brisbane and Port Moresby, “but I wouldn’t consider them as competition as such, because they have maindeck capability on that route which we don’t have.”
Air Niugini Cargo also has a partnership with Lynden Air Cargo which operates Hercules aircraft based in Lae and “we work with them and they support us if we need freighter capacity both domestically and on the international routes and we also work with Chapman Freeborn for all the large charters.”
The cargo division also has comprehensive interlining agreements with Qantas, Continental (now merged with United), Air New Zealand, Cathay Pacific, Singapore Airlines, Malaysia Airlines, Emirates and others. “We are generally very well plugged in because we need to reach Europe, North Asia and the US and of course Australia. We would like a few more partners probably across the Pacific as well,” Rodrigo says.
Strategic growth
The new cargo boss says the next stage of growth for the cargo division will take place within the next six months when it adds a small freighter aircraft to the fleet – likely another Dash 8 – “because we are promoting this ‘flying truck’ concept within the domestic sector,” he says.
“We also see a need to have a bridge between one of the Asian points probably Singapore and Sydney, linking Port Moresby because we have realised there will be a maindeck need for goods coming from the US, as well as Northern Asia for these mining and LNG projects. That is not very far away and I would say that in less than a year we will have our own maindeck freighter on an ACMI basis – most likely an A300-600F type of aircraft,” according to Rodrigo.
While currently the cargo division generates around 10 per cent of the group’s revenue of which 55 per cent of cargo revenues are generated domestically and the remaining 45 per cent from international cargo carriage, this will change within the next year with the international component equalling or surpassing the domestic.
Rodrigo notes that the carrier’s CEO is very keen that the freight division operates as a separate business under the group’s umbrella. “We will have a model where we are charged for the capacity used on the revenue sector flights,” he adds.
Brand visibility
Looking ahead definitely the brand will be more visible in the US, Australia and Asian markets, Rodrigo says. “The CEO is a major driver in these developments and is very, very keen to bring the airline onto the world stage and he does a lot of things to support that.”
“We will continue to expand the wide body operations into the markets we operate probably with some adjustments and we would also open one or two more routes in Asia,” he says declining to say which, but clearly China would be of interest.
“Definitely we will grow domestically because we’ve already identified the lack of infrastructure within the country and there’s a lot of pressure on us to open up capacity for commodities to move up and down,” he says pointing to the natural resource projects that clearly boost the need for moving goods domestically and internationally.
“Normally what happens when a new project comes it creates a surge of activity for about three years – it creates a surge of movement in terms of shipping activity and air freight and then tapers off and stabilises. But now there are three or four projects at same time and it’s creating a lot of activity both for shipping, as well as air.”
Security
Security concerns at the carrier naturally mirror those of any other international carrier, but for Air Niugini there is the added challenge of the local environment. “Domestically we also have a very concentrated effort at securing the freight because everything we carry within the domestic ports is mainly valuable cargo that attracts the attention of various people and also the not so developed infrastructure at some airports is also making it vulnerable so we do have quite an investment in securing this movement of freight,” he says. While the carrier has its own security he notes that many of the companies shipping cargo with Air Niugini also have their own security, especially for shipments of gold.
