It will take ‘the next two to three years’ before PNG Air, Papua New Guinea’s second domestic airline, can foresee a return back to pre-COVID levels of business activity, according to statement issued to Papua New Guinea’s stock exchange yesterday.
In its statement, PNG Air says the COVID-19 pandemic is continuing to cause major issues in PNG’s airline industry, with PNG Air ‘severely affected’.
Its board is planning to review its operations over the next few months ‘to devise a plan as to the future progress of the Organisation to keep it viable during the course of the pandemic.’
In the meantime, the airline has been taking ‘stringent measures to save costs and maximise utilisation of available resources’.
PNG’s current National Isolation Strategy continues to place limitations on domestic travel and is likely to continue to do so, in the opinion of PNG Air’s board. This means much lower traveller numbers than usual for the foreseeable future.
‘This pandemic, which will linger on for a few more years to come, will continue to cause uncertainty, difficulty and disruptions to PNG Air’s revenue generation,’ said the airline this week.
Governance
The COVID crisis has come at a bad time for the airline, which was already beset with governance issues. Its shares have been suspended on the PNGX since January 2019 due to delays in lodging its financial reports.
This week, PNG Air has told the PNGX that its 2019 financial year figures are likely to ‘change materially’ from those already submitted to the PNGX ‘due to corrections that will be made for errors sustained in both the 2018 and 2019 financial accounts’.
‘We’ll reinstate trading when we see all outstanding financial reports and are satisfied there’s nothing else that needs to be disclosed to the market.’
Its 2020 financial results have also not been released because, it claims, ‘PNG Air had not completed 2017 and 2018 accounts at that time and the new management were aware of the errors in accounting and misstatements that existed on these accounts’.
‘We’ll reinstate trading when we see all outstanding financial reports and are satisfied there’s nothing else that needs to be disclosed to the market,’ Chairman of PNGX David Lawrence confirmed to Business Advantage PNG this week.
Merger?
One possible way out of PNG Air’s current predicament is for it to have a closer relationship with its main competitor, Air Niugini subsidiary Link PNG.
A proposal for Link PNG to acquire a majority shareholding in PNG Air was knocked back by PNG’s Independent Consumer and Competition Commission (ICCC) in September 2020, but a revised proposal was submitted to the ICCC last month.
The two largest shareholders in PNG Air are the MRDC Group of Companies and superannuation fund Nasfund.
Under the revised deal, Link PNG would acquire a minority share in PNG Air by purchasing Nasfund’s share in the airline, and the two airlines would continue to operate independently while entering into codeshare and other cooperative arrangements to reduce their operational costs.
PNG Air is scheduled to hold its annual general meeting on 16 July.
Depending on how quickly the ICCC completes its enquiry into the Link PNG deal, that meeting could potentially be used to seek the required shareholder approval for the arrangement.
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