PNG BANKING CORPORATION CONDITIONS CONCERN AIR NIUGINI

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PORT MORESBY, Papua New Guinea (March 5, 1998-Niuswire/Post-Courier)--- Papua New Guinea Banking Corporation (PNGBC), the major creditor for cash-strapped Air Niugini, has appointed a former airline executive to the airline with full management powers and reporting directly to the bank, the Post-Courier reports.

The appointment of former Air Niugini finance director, Peter Petroulas, as a condition on the bank granting the airline an additional K8 million ($US 4.416) loan has created a major controversy between the bank and the board of Air Niugini Pty., Ltd. and the National Airline Commission.

PNGBC managing director Rupa Mulina set out the condition in a letter dated February 27, 1998 to the acting managing director of Air Niugini, Chris Mek.

The letter states: "The bank will employ a suitable airline executive to assist managing the affairs of Air Niugini.

"The employee is expected to commence work on Monday, March 2, 1998.

"The terms of engagement will be the responsibility of the bank. However, the full cost of the contract will be payable by Air Niugini.

"Although the executive is to work in conjunction with the acting managing director of Air Niugini, he is to have full management power and delegation of authority and will report to the bank.''

On Monday this week, the chairman of the Air Niugini Pty Ltd (ANPL) Board, Philip Kapal, and the acting chairman of the National Airline Commission (NAC), Kevin Byrne, sent a letter to Mr. Mulina in which they strongly objected to this condition.

The letter states that if the bank's conditions are implemented, then the bank should be responsible for covering any additional costs.

The airline officials go on to state: "The proposition that the appointee be vested with full management power and delegation of the managing director is impractical, offensive and makes for conflict of interest within the airline.

"This power is vested in the managing director only and cannot be vested in anyone else without the approval of the ANPL Board/NAC.''

Mr. Kapal and Mr. Byrne state in their letter the ANPL and NAC "reject the choice of Mr. Petroulas as both organizations believe that Mr. Petroulas' track record as finance director of the airline would indicate some shortcomings.

"Should you wish to appoint Mr. Petroulas then that is your commercial decision. However, it should be at your cost and not with the powers and delegated authority of the managing director.''

A source who spoke on condition of anonymity said the bank reacted strongly to the letter, threatening to withhold the loan unless Air Niugini agreed to the appointment of Mr. Petroulas.

The source said a meeting of both the Air Niugini Pty., Ltd. Board and the National Airline Commission was held on Tuesday afternoon, during which the earlier decision against Mr. Petroulas was reversed.

The Post-Courier sent a list of questions to Mr. Mulina yesterday about this but by late yesterday, he had not responded.

Another condition for the loan is that a bank-nominated representative be appointed a director of Air Niugini Pty., Ltd. and as a commissioner of the airline commission.

Pending the appointments, the bank's representative is to attend all meetings of the board and commission.

Furthermore, Air Niugini agrees in writing to appoint a team of "investigative accountants'' to fully review the airline. The airline is to pay for the cost of the review and all information relating to the review is to be given to PNGBC.

Title -- 1240 AVIATION: PNGBC condition hurts Air Niugini Date -- 5 March 1998 Byline – None Origin -- Niuswire Source -- Post-Courier (PNG), 5/2/98 Copyright -- Post-Courier Status – Unabridged

This document is for educational and personal use only. Recipients should seek permission from the copyright source for reprinting. This service is provided by Journalism Studies, University of Papua New Guinea. Please acknowledge Niuswire: niusedita@pactok.net.au http://www.pactok.net.au/docs/nius/

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