OBG talks to Wasantha Kumarasiri, CEO, Air Niugini

Interview: Wasantha Kumarasiri

What are the immediate priorities for Air Niugini in the current economic environment?

WASANTHA KUMARASIRI: Air Niugini has several priorities for the immediate future. The first is to manage the cost of fuel and implement mitigating strategies. In this regard, the board has approved a proposal by the management to start hedging by looking for suitable products. Air travel competition in some markets is very acute and airlines have different methods of managing this cost. We must follow suit to remain competitive. It is difficult to operate in this cost environment because some markets have regulated fuel costs, while others do not. Therefore, we have to try to navigate through this environment and stay competitive.

The cost of jet fuel in PNG is much higher than in all but one other Asian country. We have seen how market expectations for fuel are volatile, so we must try to manage that uncertainty. Since we are the biggest single user of fuel, we are of the view that it is time to liberalise the market and break down the monopoly that was given to a single producer for the benefit of the people.

Our second priority is to expand and increase capacity. To this end, we are going through a large recruitment programme for pilots and crew to expand and increase our capacity. With new aircraft purchases, we are developing our freight and cargo business because the country needs the airline’s support to move cargo economically. We are also in the process of introducing two Boeing 737-type aircraft. The first is expected to arrive in June 2012 and the second at the end of the year; both deliveries are on schedule. With these introductions, we will change the way the business is managed. We will use the new aircraft in our international expansion, the first part of which involves direct services to Sydney during the week and on weekends. We are also seeking to expand to Cebu in the Philippines twice a week, as well as to Kuching, Malaysia, and possibly Bali in Indonesia. We are also looking at possible new routes to the US territories, such as Guam.

A third priority for the airline that is important to mention is our plan to transition to an entirely new IT system, which will be completed by the end of the year.

This system is used by major airlines, including Emirates, and when it is finished, our reservations, departure control, loyalty programme and accounting departments will be integrated into one, so that within 48 hours after a flight, we will have a comprehensive monitoring platform to review performance. This will dramatically increase the value of Air Niugini.

Will Air Niugini consider joining new codeshare alliances and where do most natural synergies lie?

KUMARASIRI: We have an aircraft upgrade programme for our two 767s, and once that is complete in early 2013 we will be ready to look at possible codeshare partnerships and arrangements with major Asian carriers, such as Singapore Airlines and Cathay Pacific. What is most important to us is to have equipment compatible with their standards.

In your opinion, how would further air travel deregulation benefit the aviation sector?

KUMARASIRI: In terms of corporate governance and administration, Air Niugini is ready. The airline has seen a continuous improvement of its balance sheet over the last five years, from PGK98m ($46.64m) to PGK380m ($180.84m), a growth of 400%.

Air travel in PNG is completely deregulated under an open skies environment – there are no restrictions of entry to any carrier looking to operate in our industry.

The lack of competition is purely an economic decision.

In this environment our cost structure is very high compared with the rest of the world, and the cost of doing business is very high. We are at a big disadvantage compared to our competitors, but it is important to highlight that since 2003, Air Niugini has not increased its ticket prices despite the cost of operations going up tremendously across the board. Despite these challenging times the airline has remained profitable.