Link PNG Reapplying to Buy Minority Stake in PNG Air

by PNG Business News - April 29, 2021

Link PNG and PNG Air have reported that they have reapplied to the ICCC for Link PNG to buy a minority stake in PNG Air.

PNG Air and Link PNG also agree that ICCC acceptance would help Papua New Guineans and visitors.

The planned joint venture between Link PNG and MRDC is focused on PNG Air being an independent airline, setting its own airfares and selling its own tickets separately from Air Niugini, according to Link PNG chairman Sir Kostas Constantinou and PNG Air chairman Augustine Mano.

In a joint statement, both chairmen emphasized the importance of PNG continuing to have two separate carriers, PNG Air and Air Niugini, as well as a competitive domestic market.

They mentioned that COVID-19 has lasted much longer than anyone predicted and is continuing to have a negative impact on both airlines; thus, while it is vital that we continue to work independently on a commercial basis, it is also critical that the airlines take advantage of this ability to reduce costs.

“World aviation has been badly damaged by COVID-19, including in our region where the Fijian government has had to issue loan guarantees for K788 million to support Fiji Airways, whilst elsewhere governments have had to pay billions of Kina to keep their airlines alive.

“We believe this move if approved, will ensure PNG’s airline industry is profitable, sustainable and competitive without having to rely on Government support. 

“Both airlines are ultimately owned by the people of PNG, either the taxpayer, contributors to superannuation or as a landowner so it is critical both airlines are viable.”

The plan is focused on Link PNG maintaining a minority share status and all commercial roles being distinct and autonomous, according to the chairmen.

  • the selling of all PNG Air airline tickets, including all pricing and yield control, as well as all personnel involved in these functions;
  • PNG Air's publicity, which includes existing sales offices as well as a separate website;
  • PNG Air's board and management will be independent; 
  • all cabin crew, sales personnel, and check-in staff will wear PNG Air uniforms; and 
  • all of PNG Air's aircraft will be painted in PNG Air livery.

Back office activities that can be handled more effectively between the two carriers, as well as more efficient fleet use, will be the main integration advantages.

“We believe there is a compelling case for creating a stronger independent PNG Air, across a wider network, as well as ensuring job security,” they stated. “We will also ensure the savings created will be passed back onto our customers through more affordable airfares; with the lower prices resulting from economies of scale and through the considerable cost efficiencies that are available.”

The idea, according to Sir Kostas and Mano, would favour airline passengers as well as ensure job protection for both airlines and the continuation of the PNG Air brand in our skies. They also stated that “With the savings, we will generate, we will be able to pass this back onto our customers through more affordable airfares.”

Before the joint venture can be finalized, both Link PNG and PNG Air will need both regulatory and shareholder approvals, including from ICCC.



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ICCC Rejects Link PNG Request to buy PNG Air Shares

The Independent Consumer and Competition Commission (ICCC) has rejected Link PNG's proposal to purchase shares in PNG Air Ltd for the second time. PNG Air Ltd had asked Link PNG Ltd to buy 40% of the company from the National Superannuation Fund and 9% from other shareholders. Last week, the consumer and competition watchdog said that after completing its review of the proposed purchase, it was likely to have a significant impact on competition in the relevant areas. According to their analysis, the purchase would have possible public costs that would outweigh the anticipated public benefits. Link PNG stated in its application that PNG Air was not profitable and that, as a result of the Covid-19's influence on the aviation sector, PNG Air would most likely quit the market. Link PNG, an Air Niugini subsidiary, has claimed that the planned share acquisition must be approved in order to retain present service levels, competitiveness, and the employment of current PNG Air personnel. According to ICCC Commissioner Paulus Ain, the watchdog noticed that PNG Air had been losing money, but that the losses had been minimized as the airline increased its market share and revenues. “There was no evidence of any significant rationalization or restructure carried out by PNG Air to suggest that such measures have already been exhausted, such that continued losses are a sign of a failing firm,” Ain said. “No application provided by PNG Air or the applicant to satisfy the ICCC that PNG Air has done all it could to make it a profitable entity. “For example, there has not been any cost-cutting in 2019 and 2020 have tripled from 2017 and 2018 figures. “Whilst the financials for 2019 and 2020 are unaudited and much weight are not placed on them, the ICCC considers that the costs should relatively remain the same because, from the information available, there has not been any major changes in the administrative aspect that would contribute to such large increase. “The ICCC also understands that besides Link PNG, there are other parties that have shown an interest to acquire the Nasfund shares.”   Reference: The National (2 August 2021). “ICCC rejects Link PNG’s bid to acquire shares in PNG Air”.


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