PNG Air Disappointed As Consumer Watchdog Rejects Link PNG’s Proposed Acquisition Of Shares In PNG Air For The Second Time
PNG Air argues that Papua New Guinea’s Independent Consumer and Competition Commission (ICCC) has failed to consider key national interests and commercial imperatives for the local airline industry when it rejected, for a second-time, Link PNG’s proposed buy-in of PNG Air.
Responding to Smart Aviation Asia-Pacific, PNG Air says in a statement that national interests and commercial imperatives were highlighted in Link PNG’s application. Link PNG is the domestic regional subsidiary of national carrier Air Niugini.
“Many key players in PNG’s airline industry strongly support some form of closer cooperation between PNG Air and Air Niugini as a way of helping both organisations to survive the unprecedented economic challenges currently facing the airline industry in PNG,” it adds.
The ICCC in its statement declines the sale on the basis that the transaction could lessen competition in the relevant markets and possibly yield potential public detriments which will outweigh the likely public benefits.
The ICCC says Link PNG had earlier applied to buy 60% of PNG Air but in May 2020 it ended up only applying for approval to buy National Superannuation Fund’s (Nasfund) 40% stake, a move the ICCC rejected.
As for the latest application, the ICCC says Link PNG proposed to acquire the same 40% stake owned by Nasfund in PNG Air with the possibility of acquiring a further 9% from other shareholders.
Link PNG in its submission said that travel restrictions, imposed due to COVID-19, have greatly affected the airline industry. It says PNG Air is unprofitable and could be forced to exit the market. The proposed acquisition will stop the airline from failing and protect the employment of employees, it adds.
But the ICCC refutes arguing that while PNG Air has been making losses, the situation has improved due to the increased market share, and that PNG Air is unlikely to imminently fail or head towards bankruptcy.
ICCC says it understands that, besides Link PNG, there are other parties that have shown interest in acquiring Nasfund’s shares in PNG Air, suggesting confidence in the airline and the business potential of PNG Air.
As for Link PNG’s claim that PNG Air and Link PNG will continue to operate independently and compete with each other after the acquisition, ICCC concludes once Air Niugini acquires the shares, it will have substantial influence over the management and operations of the airline as the major shareholder.
Since PNG Air is a strong competitor, ICCC says the acquisition will remove this effective alternative, resulting in a monopoly, potentially leading to an increase in prices. The proposed acquisition would also increase Air Niugini’s debt level.
Based on the above reasons, ICCC says there is no basis for the proposed acquisition.
PNG Air says it has also undergone a recent management change with Stanley Stevens becoming acting CEO, replacing Anthony Pereira, who resigned for family reasons. Pereira was CEO and acting chief financial officer. Nisaal Jai is now acting chief financial officer. Stevens has been with the airline for more than 28 years and was previously general manager for facilities and ground services. Jai was previously PNG Air company secretary and financial controller.
PNG Air says that they are awaiting the ICCC’s final determination on Link PNG’s separate application for authorization of a proposed joint operating agreement and codeshare share arrangement with PNG Air on domestic routes.
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