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PORT MORESBY, Papua New Guinea (April 1, 2001 - The National/PINA Nius Online)---Air Niugini's accumulated losses and near bankruptcy are among issues potential buyers are grappling with as the announcement of the successful bidder for a 49 percent stake in the airline was deferred.

In 1995, Air Niugini's losses totaled K 27.7 million (US$ 8.3 million).

By 1999, the airline "was on the verge of bankruptcy," according to a status report currently before the Privatization Commission. In 1999, the airline's accumulated losses were K 107 million (US$ 33 million).

No audited reports on the airline have been available since 1997.

Privatization Commission Chairman Ben Micah was to have announced the name of the successful bidder on Friday. But he emerged from a commission board meeting to tell the waiting media that the decision had been deferred by two weeks.

Australia's Qantas is understood to be among the front-runners in negotiations to establish a strategic link with Air Niugini. Air Niugini operates international services to Australian, Asia and the Pacific Islands.

It is also the country's main domestic airline.

Mr. Micah said additional information was needed before the commission makes a decision, which would be officially announced by the prime minister. He did not give details.

The airline’s dire financial situation is contained in a report by accounting firm PriceWaterhouseCoopers, which was available at the board meeting.

"Air Niugini recorded consecutive losses in the last four years of its operations despite growth in revenue. The growth has been more than offset by an exponential growth in costs," the report said.

"In 1999, the company recorded a loss before tax of K 34.5 million (US$ 10.6 million), an increase of 9 percent compared to 1998 and the accumulated losses at the end of 1999 were K 107 million (US$ 33 million), thus reducing total shareholders' funds to a net deficiency of K 25.3 million (US$ 7.8 million).

"Working capital deficiencies in the last four years reflected the extent to which operations were financed by customers.

"In terms of cash flows, liquidity has been a major issue for the airline in recent years. In 1998, the airline was on the verge of bankruptcy as it faced a severe liquidity crisis.

"Borrowing facilities at the Papua New Guinea Banking Corporation were extended to nearly K 90 million (US$ 27.9 million) purposely to service debt obligations. The government made an unbudgeted capital injection of K 50 million (US$ 15.5 million) to service the borrowing.

"In 1999, the airline operated on an overdraft of K 22.8 million (US$ 7 million)," the report said.

In that year, total revenue to the airline was K 226.7 million (US$ 70 million) of which 60 percent was generated from internal travel; 40 percent was generated through international passenger fares. Its operating expenses totaled K 254.1 million (US$ 78.7 million).

Total assets of the airline in 1999 stood at K 155.5 million (US$ 48.2 million), liabilities were at K 54.697 million (US$ 16.9 million) and debts were at K 50.269 million (US$15.5 million). The shareholders' funds and reserves were at a loss of K 25.5 million (US$ 7.9 million).

Allowing for depreciation and amortization at over K 10 million (US$ 3.1 million) annually, the value of assets is further deflated.

The PriceWaterhouseCoopers report also noted that a majority of the airline's passengers travel on the Fokker F28 fleet, "which is nearing the end of its economic life."

For additional reports from The National, go to PACIFIC ISLANDS REPORT News/Information Links: Newspapers/The National (Papua New Guinea).

Pacific Islands News Association (PINA) Website: 

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