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National carrier Air Niugini, PNG Air, and other third-level airlines may be facing bankruptcy in the next 12 months, People’s National Congress deputy leader Richard Maru has warned.
“This will happen unless there are significant cost-cutting measures, including the government going to their rescue,” he said.
Maru said the Minister for Public Enterprises and State Investments Sasindran Muthuvel proposed on June 12 that the government should provide a relief package of K300 million (US$87.7 million) for Air Niugini because the airline was “currently facing liquidity issues and is in dire need for more capital injection and support to mitigate the economic slowdown”.
“Alarmingly, at this critical time when Air Niugini desperately needs a K300 million bailout, the government appears to be facilitating a deal for Air Niugini to buy out Nasfund’s shares in PNG Air,” Maru said.
“This is at a time when PNG Air is about to go bankrupt; Air Niugini will likely take over existing routes anyway.”
He said to any independent observer, the proposed transaction would appear suspicious, makes no business sense and can be perceived as a corrupt deal by people with vested corporate interests.
Maru said concerns are being raised as to whether there is any validity in claims of conflict-of-interest for decision makers at Air Niugini in relation to their private business interests as well as partnerships with Nasfund.
“The question must be asked – why is this purchase just for shares held by Nasfund, and not shares held by other investors such as MRDC and private shareholders?” he said.
“James Marape must explain where the government, on behalf of Air Niugini, is getting the money to buy out Nasfund’s interest in PNG Air.
“This is particularly important at a time when Air Niugini itself can go ‘belly up’ if the government does not come to its rescue with the K300m that it needs.
“I call on my brothers in the National Executive Council, to wake up your sleeping Prime Minister and urge him to take decisions now to safeguard Air Niugini from going belly up and reorganise the airline industry,” he said.
Meanwhile, PNG Air has refuted Nasfund’s claim that the airline has not been performing well.
Nasfund had described PNG Air as a non-performing, illiquid and non-yielding investment for the fund.
It holds 39.29 per cent of the total shares on issue and is the largest institutional investor in the airline.
“This is totally incorrect,” acting chief executive Anthony Pereira told The National.
“They are basing on 2016 information and subsequent erroneous reports sent to the PNGX (PNG National Stock Exchange) markets for 2017 to 2019.
“Our financial reports are being audited for 2017 to 2019 as we speak following our engagement two months ago with an independent chartered accounting firm in Australia.”
Pereira said the accounting firm would “review and submit their views on major erroneous accounting entries that were detected and done between 2017 and 2019”, which showed losses rather than profits.
He said the PNG Air auditors refrained from signing off the accounts.
PNG Air trading was suspended on PNGX.
“These have now been rectified following advice from the independent chartered accounting firm and forwarded to our auditors in PNG to finalise the audit,” he said.
Pereira said between 2017 and 2019, the airline made profits which were now part of the audit conducted.
“We also need to mention that had we not made profits, we would not have been in a position to have a cumulative amount of K88.8 million that we paid via remittances to our aircraft lessors and ATR (aircraft manufacturers and parts) for deposits to be held for such things as aircraft maintenance reserves, rental deposits, pre delivery payments for new aircraft and deposits for aircraft spare parts,” he said.
“If we are a non-performing firm and ill-liquid as claimed, none of this could have happened.
“Since 2016, PNG Air did not borrow extra, nor did we get any further funding from shareholders, nor did we get any grants for us to have achieved what we achieved.
“Further, we have also submitted to our auditors our three-year strategic plans to 2023 including cash flows and savings we are achieving as a consequence of how the new management of PNG Air is going to do business in the future.”
On PNG Air’s suspension of trading on PNGX, he said: “We have informed PNGX that the accounting errors have been fixed and forwarded to our auditors who are now conducting the audit.
“Once this is done and the audited financial reports for 2017, 2018 and 2019 are finalised and signed off, they will be submitted to PNGX.
“PNG Air’s suspension at PNGX will then be immediately lifted,” he said
SOURCE:POST COURIER/THE NATIONAL/PACNEWS
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