QANTAS hurting local carriers in Papua New Guinea

ILYA GRIDNEFF (AAP)


There are concerns in Papua New Guinea that Qantas flights to Port Moresby are threatening the survival of PNG's second biggest carrier Airlines PNG (APNG).

The Australian airline entered into the PNG market in July hoping to capitalise on the country's $16 billion ExxonMobil-led Liquefied Natural Gas project.

A subsequent price war resulted in flights to Port Moresby from Cairns being cheaper than to Sydney.

But since the Qantas entry, APNG has reduced its once daily Cairns-Port Moresby run to twice a week.

Qantas, which has a codeshare agreement with state-owned national airline Air Niugini on flights to Sydney and Brisbane, has declined to comment on how this has affected APNG.

But a government letter, sighted by AAP, says "(There is) grave concern about the recent entry of Qantas into the Cairns-Port Moresby route.

"The Qantas entry in its own right was forcing both national carriers out of the market and there could be removal of competition and higher prices as a result".

Meanwhile, several government sources have told AAP that APNG is seeking a merger with Air Niugini.

They said APNG and other private investors were lobbying to get a merger proposal through cabinet.

APNG CEO Geoff Toomey, a former Air New Zealand CEO and before that Qantas deputy CEO and chief financial officer, declined to comment.

APNG spokeswoman Danae Jones did not deny the merger push but said the airline would not talk about "speculation and rumour".

"Significant improvement in financial performance is expected for 2010," she said.

However, Air Niugini CEO Wasantha Kumarasiri said a merger was not under consideration.

"(Prime Minister Michael Somare) and our minister (Public Enterprises Minister Arthur Somare) have assured us they are dedicated to Air Niugini," he said.

A spokesman from the Prime Minister's Office also played down the merger talk.

"We hope sense will prevail," he said.

The merger rumour comes in the same month APNG marked a year since one of its planes crashed en route to Kokoda, killing all 13 people on board, including nine Australian Kokoda trekkers.

In 2008, the Cairns-based Wild family sold a 50 per cent stake in APNG through a public float on the Port Moresby stock exchange for an estimated 100 million kina ($A40 million).

John Wild remains the largest APNG shareholder with 47 per cent while his son, APNG chairman, Simon Wild, is also managing director of Wild family-owned Queensland-based regional airline Sky Trans.

Since the float APNG shares have dropped from one kina (40c) to 63 toea (25c).

In the APNG 2009 annual report Mr Wild blamed the company's 24.6 million kina ($A9.8 million) loss on the global economic downturn, the Kokoda crash and even the Icelandic volcanic eruption that grounded planes in the northern hemisphere.

For the same period Air Niugini declared a profit of 68 million kina ($A27.2 million).

Comments

  1. AnonymousAugust 20, 2010 at 9:16 AM

    Polye: Do not fear proposed merger

    A MERGER of two airlines is not such a bad thing and no one should fear it, Transport and Works Minister Don Polye said yesterday.

    Polye told The National the proposal for Airlines PNG and Air Niugini to merge was his, and he was floating the idea among fellow ministers and industry stakeholders.

    He said the government’s “open sky” policy would attract more competitors to the country as PNG becomes an attractive destination for commerce, trade and holiday.

    “Our skies will get busier as we have seen with the entry of Qantaslink and Virgin Blue.

    “The merger proposal might be the best option for both airlines (APNG and Air Niugini),” he said.

    “Air Niugini may not like this, but it must remember the playing field has never been even. Air Niugini has survived over the years, and re-fleeted through massive capital injection from the government.

    “APNG may not be government-owned and funded, but it is about 30% PNG-owned. It has served the country well, flying to some very rural and tough areas and is helping to deliver our development programmes.

    “It might have debt, or suffered losses, but that will be taken into account when determining equity in the merger.”

    He said his advice was that a merger would save both airlines K150 million, give the merged entity a better capital base to work from and remove the need for capital injection by the government.

    “I believe this strategy is best for both airlines going forward.

    “I have discussed this with the prime minister and he is supportive.”

    Polye said the merger proposal would be thoroughly discussed.

    ReplyDelete
  2. AnonymousAugust 20, 2010 at 2:17 PM

    It would be the regulator's interest to ensure a level playing field such that the viability of players to remain in the market or competition justifies a market and for air travelers to have regulated services that are affordable, safe and regular.

    APNG is already struggling with a financially negative positions over two consecutive years since it was listed with declining share prices. The regulators ICCC and OCA must provide advice in the interest of market competition, the interest of travel safety plus unmentioned risks. Any bail out by APNG remains ultimately with the APNG shareholders on who makes them offers so that APNG remains afloat and viable against all risks exposure in any run up to avoid liquidation. The last thing is to have a fire sale of a broken business. The major shareholders of APNG have a nightmare on hand.

    It will be a matter of advice, advice, advice on value. How APNG shareholders and management act is in their hands. Only a miracle can save APNG.

    If I was PM, I will offer a bridge or a bail out proposal to APNG with certain conditions but not merge CG with PX. As both companies belong to the people of Papua New Guinea and operate in my country serving my people who elected me into power. Hence the APNG shareholders will need to take a tough stand on high management costs and bring in the best management team that can deliver the company out of this gloomy waters so that APNG can fly.

    If I was PM, and as I have publicly offered to Bainimarama of Fiji to fund elections in Fiji, I think that is easy, would provide a generous money solution for APNG.


    Hello?

    ReplyDelete

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