State to decide whether to buy shares

THE National Executive Council will make the final decision on whether Air Niugini should buy Nasfund’s shares in PNG Air, says State Enterprise Minister Sasindran Muthuvel.
Muthuvel said the airline board would present the business argument for the transaction to the Kumul Consolidated Holdings which had engaged independent experts to make a recommendation to Cabinet.
The Independent Consumer Competition Commission (ICCC) will also have to approve the transaction, he said.
“I am not in the business of sanctioning deals that aren’t favourable to state-owned service delivery, that don’t propose an acceptable return on investment or benefit the company or state,” Muthuvel said.
“This concerns only the Nasfund shares in PNG Air, which is part of a larger package of institutional support. The due diligence team will advise whether the assumptions make sound business sense and substantiate whether it will deliver the proposed benefits of cheap airfares, cost reductions in the airlines, preservation of jobs and a sustainable airline industry in PNG.”
He said Air Niugini’s cash flow position had suffered “from years of neglect” and it was necessary “to structure the reduction of aged debt through instalments”. He denied that the Government was not currently paying outstanding amounts to Air Niugini’s creditors.
“Air Niugini has implemented several strategies to maintain the viability of its operations including cost reduction programmes, reduced non-core activities, refinancing and restructuring its debt and renegotiation on supplier contracts.
“The Air Niugini board and management have delivered K280 million of cost savings across their operations and they recognise that there are tougher decisions ahead.
“Unfortunately, that doesn’t detract from the likelihood of a projected loss of K99 million (for) the fiscal year.”