PX clarifies PNG Air share buy proposal
Air Niugini has clarified that the proposal by its subsidiary, Link PNG, to buy 40% of shares in PNG Air is not a merger but a joint venture partnership with existing shareholders.
Air Niugini CEO, Bruce Alabaster, assured that PNG Air will remain a separate corporate entity, maintain its own brand, and that there will not be any job losses.
Alabaster explained these following misconceptions that the proposal was a merger.
Air Niugini CEO, Bruce Alabaster, says the proposal to purchase 40% of NASFUNDs shareholding in PNG Air is just that, and there was no merger.
“Critically it’s not a merger. It's proposed to be a joint venture with MRDC and the other Shareholders in PNG Air. We are proposing to offer the smaller shareholders the opportunity to sell their shares if they like, but we actually honestly feel that they stayed in and that we together take PNG Air into profitability,” said Alabaster.
The CEO said over the last four years PNG Air lost K93 million, and they’ve carried losses forward of K143 million.
“Now this is money that belongs to the people of PNG. This is either small 2000 odd small investors who invested when PNG Air was listed or the private sector employees who contribute to this via their superannuation savings, or the landowners via MRDC. So this is the people’s money that we need to return to them a profitable organization.”
If the proposal is approved, Alabaster says PNG Air will remain a separate corporate entity and maintain its brand.
However, both Link PNG and PNG Air will implement strategies, such as synergizing schedules, to return profitability to both airlines.
“Every time we fly two aircrafts to the same location at almost the same time we are wasting the people’s money. So we’ll continue to actually compete at the front end, but we ensure the schedule is efficient at the back end, and that people actually get value for money and that people get more out of those foreign assets owned by foreign companies that we are using.
“Now that will deliver initial K126 million in profit, climbing to K165 million in benefit across the two airlines because again whether its Air Niugini owned by the tax payers of PNG through the Government, or PNG Air owned by NASFUND’s contributors and MRDC’s landowners, both airlines are actually owned by the people of PNG. So, if we can turn organizations into vastly more profitable organizations and drive down airfares, that is to the benefit of PNG,” said Alabaster.
The CEO made a number of undertakings which include:
PNG Airto be retained as a separate corporate entity with;
Its own brand. PNG Air aircraft and its sale activities will continue to be branded as PNG Air.
Its own management team
Cabin crew and check-in staff provided by Link PNG as part of the Services will wear PNG Air uniforms, and operate in accordance with PNG Air procedures
Its own sales offices and website
PNG Air will separately price air tickets, and manage yield
Domestic airfares will not increase and, once synergies permit, will be reduced.
There will be no PNG National job losses;
There will be no ongoing requirement for the PNG Government or PNG Shareholders to continue to subsidise the PNG airline industry;
MRDC's present shareholding position in PNG Air will not be diluted;
Provision of affordable and sustainable services:
Rationalization and economies of scale will lead to both affordable airfares and freight opportunities on a sustainable basis, without incurring losses
From the identified improvements on the combined group profitability there is the potential to at least partially underwrite services to locations such as Telefomin, Jacquinot Bay, Vivigani, Esa’ala , Woodlark, Balimo, Hayfield
Increased employment opportunities and training of skilled workers;
Ability to raise new capital to finance ongoing growth;
Improved and increased frequency of services, with no additional resources;
More effective promotion of tourism. Allows for the faster development and achievement of the four-hub strategy than will otherwise be possible with two separate airlines. Ability to open many new, more remote areas to tourism through access, and affordable airfares;
Ability to become a regional Pacific/Melanesian airline operating a modern, extensive fleet of aircraft;
Firmly established hub and spoke network of major trunk routes and rural services linked in key provincial areas;
Centre of Excellence in Aviation:
Dominant Maintenance organisation in SE Asia//Pacific Islands
Established Engineering College and Training Centre
Regional Pilot Training Centre servicing global pilot demand
Airport Management and Development Division active regionally
Major Contributor to Papua New Guinea’s economic growth and living standards
Link PNG will require all regulatory and shareholder approvals, including from the Independent Consumer and Competition Commission (ICCC), before the joint venture is finalised.