Papua New Guinea’s low foreign currency reserves have forced Virgin Australia to permanently withdraw flights into Port Moresby reports Simple Flying.
It said Virgin Australia can’t repatriate hard currency from Papua New Guinea as it is short of foreign currency reserves. The local currency, the Kina, is in long term decline against most hard currencies, including the United States dollar and Australian dollar. Consequently, a few years ago, Papua New Guinea’s central bank began to restrict the outflow of hard currencies from local bank accounts.
The August 2020 Administrator’s report to Virgin Australia creditors is the revelation Virgin Australia can’t repatriate its Australian dollars from Papua New Guinea. The equivalent of around US$7.75 million (K27.4 m) is stuck in the country. The administrator’s report says the monies are; “… trapped due to a shortage of Australian dollars in Papua New Guinea. As a result, these funds are not expected to be released from Papua New Guinea.”
The report says it’s not the first time an airline has been unable to get money out of a country owing to a cash crunch there. However, it’s not the kind of situation that encourages an airline to start flying back in again.
With Virgin Australia’s exit it has now narrowed Australia – Papua New Guinea market to just two airlines.
It leaves the small but important market between Australia and Papua New Guinea to Qantas and Air Niugini. Right now, only Air Niugini has flights running but owing to Australian Government arrival caps, no flights are available to book until the next quarter.
According to Australian Government statistics, in the 12 months to December 31, 2019, 283,398 passengers flew between Australia and Papua New Guinea. There were 496,314 seats available, indicating an average passenger utilization rate of 57.1%.
Before the travel downturn, Virgin Australia flew between Brisbane and Port Moresby five days a week using Alliance Airlines’ Fokkers on a wet lease arrangement. In 2019, 28,865 passengers boarded a Virgin Australia flight to or from Papua New Guinea. Over that year, the seat utilization rate was 50.5%. Coming back to Australia, the flights carried 118 tonnes of cargo over 2019.
Despite typically hefty airfares on routes between Australia and Papua New Guinea, a 50.5% seat utilization rate will not please the bean counters at Virgin Australia. In part, that may explain why Virgin Australia is now giving Port Moresby the cold shoulder.
Source: Simple Flying