Rumours of an airline merger

Author: Ilya Gridneff for AAP

HONIARA, Aug 18 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).