More DoubleTalk By Peter O’Neill, This Time About Air Niugini Privatisation



By JERALD LAMA

I am confused about what is going on with Air Niugini being on the list for privatisation.  In one part of a recent official statement on State Owned Enterprises our Prime Minister Peter O’Neill has said that Air Niugini has “maintained a high level of customer service that is internationally acceptable”.   Yet only a few paragraphs further in the same press release, the PM states that SOEs “have not fully been able to realize its potential and its ability to deliver world class services”.  Which is it?  Is Air Niugini delivering internationally acceptable services or not?

This is the latest example of our Prime Minister’s tendency to lie without thinking.   Sometimes his turnaround statements come so quick that a high schooler can tell that the PM is talking against his own talk.  

It is hard to trust a leader who is so easy to catch telling lies.  When do we believe and when not?   When he often says two opposite things about the same topic at the same time, which statement do we believe?   This dilemma confronts PNG’s most intellectual and literate citizens and effects the PM’s credibility.   We can’t tell if he is giving us facts or lies when he speaks and the same is true of most of SOE Minister Ben Micah.

When the government attempted to offload Air Niugini more than a decade ago, not one airline in the world was interested in taking over our relatively small airline.  The economics has gotten worse since then, with more mergers and bankruptcies of the world’s smaller airlines.  No profitable airline in the world is interested in offering its professional management skills to Air Niugini either 10 years ago or now.   The Prime Minister’s negative statements about all government SOEs imply that the last two CEOs of Air Niugini, Mr Wasantha Kumarasiri and Mr Simon Foo have been imcompetents.  Yet, Foo is still the Air Niugini boss and Kamarasiri is now in charge of all state owned enterprises so what is the true story?

Why is Air Niugini privatisation now a good move, when the previous Somare government voiced concerns that “privatisation would jeopardise domestic routes that provide a vital service to regional people and encourage economic development, but which fail to realise a profit”?   The truth is that privatisation often leads to discarding unprofitable domestic routes.  Air Niugini already forces some provinces to pay subsidies to get any air service at all to their provincial capitals as they say the routes are losing money.   Privatise Air Niugini and we’ll have a company that can’t just break even, it will be pressured to make a profit.  That means it will be demanding more money from the provincial governments to maintain the service, if it even tries to continue the service.  

Airfares will rise to generate the revenue required to put profits into the pocketbooks of the shareholders.  Unless you are so rich you can buy thousands and thousands of shares of Air Niugini, you will never make as much money off those shares as the extra costs you will pay for plane tickets.  Air Niugini’s fares will shoot through the roof just like BSP’s fees often completely eliminate the money we should be earning in interest on our savings accounts.

Since it is clear that no reputable airline is interested in taking on 50% stake in Air Niugini, this means the shares will end up being bought by investment organisations such as superannuation funds as well as individuals.  Any airline that no other airline was interested in buying more than 10 years ago when pressures on profits weren’t as high as they are today will not be an airline that any sensible superannuation fund nor sensible individuals will risk their money on now, especially after our PM has said that Air Niugini needs a big money investment to keep it going (maybe next week he will say the opposite?).  That means the share prices are likely to be very low and not able to generate sufficient funds by itself to cover the investment requirements.   People buy and sell shares in the expectation of earning a profit.  None of this is free money to Air Niugini and it had better pay back the money to the shareholders or the share prices will collapse and no one will want to invest.

The PM says that Air Niugini needs capital investment to flourish and the government cannot afford it.   This is the same PM who thinks his government has enough money to offer K500 in foreign aid to Fiji and other Pacific Island nations.   Unless our Prime Minister is lying about the foreign aid donation, which is quite possible, that K500 million could be used instead to buy 6 brand new Bombardier 400 NextGen planes to add to the fleet and replace the aging Fokkers, which come from a company that went bankrupt and collapsed in 1994.

We keep hearing how billions in LNG money will make the PNG government rich, yet the PM tells us that government is too poor to still support state owned enterprises that provide basic services to the people of Papua New Guinea.   PM says that we will still have affordable airfares on Air Niugini, yet global economic indicators suggest that Air Niugini would find it close to impossible to find money to make all the new investments the PM says is necessary,  as well as make the profit that the shareholders will demand, as well as giving affordable service to the people of Papua New Guinea.   This is masalai economics, it all looks like magic or something you dream about but never see happen.  

Something is not right about the Air Niugini story and unfortunately there is no way to know whether the Prime Minister will talk straight or not, since we can’t believe much of anything he tells us.

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