In a statement, NASFUND says the decision by the Board of Directors to accept the offer is a purely commercial decision and is in the best interest of the Fund and its members.
NASFUND holds 39.29% of the total shares on issue and is the largest institutional investor in PNG Air.
Since 2008 NASFUND has invested in PNG Air K76 million, comprising of K31 million in equity and K45 million as a loan provided to PNG Air as part of rescue packages given between 2016 and 2017 by the major shareholders.
NASFUND says it has not received a single dividend payment from the company since its initial investment in 2008, while its share price from the initial float of K1 per share has declined to 12 toea per share before PNG Air’s suspension from trading on the PNG Stock Exchange (formerly Port Moresby Stock Exchange).
The fund says PNG Air is a non-performing, illiquid, and non yielding investment.
On the 27th of May, 2020, Link PNG announced its intent to purchase NASFUND’s shareholding in PNG Air and after meticulous deliberation, the NASFUND Board accepted in principal, Link PNG’s offer.
NASFUND says the concerns of fair competition and job security for PNG Air employees has been adequately covered in the businesses case Link PNG presented to the NASFUND Board.
The Fund says PNG Air has been under immense pressure to remain operation and faces significant risks to survive without shareholder support.
NASFUND CEO, Ian Tarutia, said “We view the proposed deal as a win-win for all parties involved. Firstly, NASFUND protects the investments value of its members. Secondly, no PNG Air citizen staff will lose their jobs. Finally, it is in the country’s interest to have one strong airline providing efficient and cost effective air services for our people rather than two underperforming carriers. PNG Air has a better chance of survival it partners with Link PNG under a more efficient operating model.”
NASFUND believes the proposed deal will bring stability to the domestic airline industry, protect jobs and ensure the continuance of reliable, safe, and affordable air services in the country given that both airlines continue to operate.
The completion of the transaction requires procedural and regulatory approvals including ICCC clearance.
Air Niugini CEO, Bruce Alabaster, says If the proposal is approved, PNG Air will remain a separate corporate entity and maintain its brand.
However, both Link PNG and PNG Air will implement strategies such as synergizing schedules to return profitability to both airlines.
“Every time we fly two aircrafts to the same location at almost the same time we are wasting the people’s money. So we’ll continue to actually compete at the front end, but we ensure the schedule is efficient at the back end, and that people actually get value for money and that people get more out of those foreign assets owned by foreign companies that we are using.
“Now that will deliver initial K126 million in profit, climbing to K165 million in benefit across the two airlines because again whether its Air Niugini owned by the tax payers of PNG through the Government, or PNG Air owned by NASFUND’s contributors and MRDC’s landowners, both airlines are actually owned by the people of PNG. So, if we can turn organizations into vastly more profitable organizations and drive down airfares, that is to the benefit of PNG,” said Alabaster.
Alabaster made a several undertakings and among them include no job losses for PNG Air staff, and there will be reductions in air fares overtime.