The Independent Consumer and Competition Commission (ICCC) has rejected Link PNG's proposal to purchase shares in PNG Air Ltd for the second time.
PNG Air Ltd had asked Link PNG Ltd to buy 40% of the company from the National Superannuation Fund and 9% from other shareholders.
Last week, the consumer and competition watchdog said that after completing its review of the proposed purchase, it was likely to have a significant impact on competition in the relevant areas.
According to their analysis, the purchase would have possible public costs that would outweigh the anticipated public benefits.
Link PNG stated in its application that PNG Air was not profitable and that, as a result of the Covid-19's influence on the aviation sector, PNG Air would most likely quit the market.
Link PNG, an Air Niugini subsidiary, has claimed that the planned share acquisition must be approved in order to retain present service levels, competitiveness, and the employment of current PNG Air personnel.
According to ICCC Commissioner Paulus Ain, the watchdog noticed that PNG Air had been losing money, but that the losses had been minimized as the airline increased its market share and revenues.
“There was no evidence of any significant rationalization or restructure carried out by PNG Air to suggest that such measures have already been exhausted, such that continued losses are a sign of a failing firm,” Ain said.
“No application provided by PNG Air or the applicant to satisfy the ICCC that PNG Air has done all it could to make it a profitable entity.
“For example, there has not been any cost-cutting in 2019 and 2020 have tripled from 2017 and 2018 figures.
“Whilst the financials for 2019 and 2020 are unaudited and much weight are not placed on them, the ICCC considers that the costs should relatively remain the same because, from the information available, there has not been any major changes in the administrative aspect that would contribute to such large increase.
“The ICCC also understands that besides Link PNG, there are other parties that have shown an interest to acquire the Nasfund shares.”
Reference:
The National (2 August 2021). “ICCC rejects Link PNG’s bid to acquire shares in PNG Air”.
