Simon Foo has been with Papua New Guinea’s national airline, Air Niugini, since day one and is now its Chief Executive Officer, after 12 years as a board member. Celebrating the airline’s 40th anniversary, he talks to Business Advantage PNG about the airline’s priorities and needs for the next 10 years.

Air Niugini’s Simon Foo

Business Advantage PNG: You’ve been with Air Niugini a long time in various roles. What are the company’s priorities now you are CEO?

Simon Foo: I’ve been appointed on a two-year contract until such time as a substantive appointment can be made, and I see my term here as more about stabilising, consolidating and preparing the platform for the next eight years.

We released one Boeing 767 in late October 2013 and two de Havilland Dash 8100s in early November. So, now we have 30 aeroplanes. This gives us an opportunity to look this year at possibly putting another Boeing 737 on.

What we call in airline terms ‘available seat kilometres’ is probably down by about eight per cent.

We’re experiencing a 10% slow down in our business in revenue terms, so we’ve got to take the move to rein in the costs and rationalise our capacity.

Business Advantage PNG: In recent times, Air Niugini has launched some new routes—to Bali, and from Cairns to Rabaul direct. What was your thinking behind those routes?

Simon Foo: Firstly, we’re a government airline and I think it’s important that we follow government policy.

We hadn’t had an air service arrangement with Indonesia for many years. With the fast-growing economy in Indonesia, and with closer political ties between our governments, our government asked us to have a good hard look at opening up an air service, which we have done as of April 2013.

Talking about Rabaul: the government has initiated a four pillars strategy, Port Moresby being the administrative capital, Lae the industrial, Mount Hagen being agricultural, and Rabaul in East New Britain being tourism.

‘For players coming into this market, they need to have a hard look at where the business is.’

The government sees a future for tourism after the mining boom is finished.

So, we have to start putting some steps in place for the future. Newcrest used to run a charter service between Rabaul and Cairns to move its fly-in and fly-out mine workers.

It was just a case of Air Niugini making an arrangement with Newcrest to sell commercial traffic on that run. Newcrest has now come to an arrangement with us to do another solution for their mining people but we have kept the Cairns–Rabaul route open, with tourism development funding from the East New Britain provincial government.

Business Advantage PNG: Where else are you looking for further route development?

Simon Foo: For an airline our size, and for the volumes that we experience, we need to concentrate on those routes we have now and try to develop frequency, rather than opening too many gateways.

We operate to 19 domestic airports, and it’s part of our mandate as a national airline that we service as many routes in PNG as possible.

Some routes are marginal, some routes are run at a loss. The golden triangle, if you like, is Port Moresby–Lae, Port Moresby–Rabaul, and Port Moresby–Mt Hagen.

Business Advantage PNG: Your competition includes some international airlines, Airlines PNG, and charter flights. Is there room in the market for more players, or do you feel that the market is well-serviced as it is?

Simon Foo: The first issue, of course, is the lack of economy of scale. Last year, Air Niugini carried 1.2 million passengers, but we count our passengers by sectors. So, if you travel between Lae and Port Moresby, for example, you’re counted twice.

‘As a result of those infrastructure restrictions, our aeroplanes are only flying on average four hours a day. In Australia, planes fly about 10 to 12 hours a day.’

So, that 1.2 million becomes 600,000. Then, some people in PNG travel several times a year, so you divide again. The core aviation market in PNG may only be about 350,000 or 400,000 passengers.

For players coming into this market, they need to have a hard look at where the business is.

Air Niugini has bilateral agreements with many countries in the world, including Australia, the Philippines, Malaysia and Thailand. These open up the way for the designated carriers of each country to fly in to each other’s countries. The airlines of those countries make the commercial decision whether or not to fly into PNG.

Business Advantage PNG: So, the door is open to them if they choose to take it?

Simon Foo: That’s correct.

Business Advantage PNG: You have expressed a desire to purchase a Boeing 787 Dreamliner, which is one of the largest passenger aircraft ever built. Is there really a capacity for that kind of aircraft for PNG?

Simon Foo: The Dreamliner is on the planning table to replace the Boeing 767s on the routes connecting PNG to Brisbane in Australia, Singapore and Hong Kong. The 767s have recently been refurbished with the state-of-the-art interiors. There are nice seats, up-to-date in-flight entertainment systems. The investment has been put in there so that they will last until 2017, when we expect the first Dreamliner to come online. Another will come in 2018.

The cost of two Dreamliners is just over US$300 million and Air Niugini’s board, management and Shareholder will have to be satisfied that this is the right aircraft type for Air Niugini at this time. The Dreamliner will be more cost-efficient, even though the capital costs are higher. Its capacity is also slightly bigger than the 767.

Business Advantage PNG: Do you have a wishlist of things you’d like to see done to the infrastructure affects the impact on your business?

Simon Foo: To start off with, let’s get every strip that we fly to up to a standard where there aren’t any closures of the strips due to wash-off by rain, and impediments in the airway approaches where the trees grow too high. Plus, improve runway strength, length and width.

Right now, we have eight different types of aeroplanes to service the various demanding airstrips that we have.

We could reduce crews, reduce the costs of engineering and spare parts holding—that’s where we could get a better hold on our costs.

The other ‘big ticket’ item is that there are only four night landing strips in PNG, outside of Port Moresby. We can only fly at night to Kavieng, Lae, Madang and Manus Island. And there are only four ports into which you can fly a 737, so we’re limited to twice a week to these destinations due to the strength of the runways.

As a result of those infrastructure restrictions, our aeroplanes are only flying on average four hours a day. In Australia, planes fly about 10 to 12 hours a day.

Business Advantage PNG: Long-term, what kind of services would you like to be offering?

Simon Foo: The ultimate dream is to service the current network internationally with daily services. I’d like to see us servicing the communities within PNG seven days a week.