Paul Phelan/PORT MORESBY
AIR NIUGINI'S new chief executive and former company secretary, 31-year-old lawyer Moses Maladina, faces daunting tasks in his work of grooming the airline for privatisation.
Decades of political interference in route structuring, fleet decisions, employment policies and fare pricing have brought the Government-owned Papua New Guinea (PNG) flag carrier to a confluence of events which will have a heavy bearing on the price the which Government reaps from its forthcoming sale.
Maladina is convinced that a new corporate attitude is a necessary first step. He took the airline's headquarters in tropical Port Moresby by surprise when, having convened his first management meeting, he postponed the agenda until his executives were more formally dressed. He says: "I told all the directors, `I won't talk to you. Go and get a necktie and come back.' Now they come in every Tuesday morning, where previously they would have a directors' meeting twice or three times a year. I've given them each a charter and a job description; I've given them dates to accomplish their goals, and I expect achievement. Previously, they never talked to each other. Now, they're ripping into each other, and we're starting to solve problems," he says.
The problems are abundant. The fleet of eight elderly Fokker F28s flown on domestic and regional international services is a legacy of the perceptions of past politicians that displacing jet-powered aircraft with turboprops amounts to a loss of face. The airline also operates two Bombardier de Havilland Dash 7s locally. Yet the F28s' average sector time is 38min, and their utilisation is miserable because of the dearth of navigation aids, night-capable airfields and surface infrastructure, with deteriorated runways limiting the utility of any new type to only a few airfields. For all those reasons, it is impossible to conceive a business plan, which would support the high capital cost of new jet-powered aircraft. The airline's two Airbus A310s, operated on scheduled services to Australia, Hong Kong, Manila in the Philippines, and Singapore are under used, and recent negotiations with Australian flag carrier Qantas, to assume virtually all Australia-PNG services on a capacity sharing basis, appear to have foundered on Qantas' fear that the move would send the wrong signal to regulators, in coming reviews of Australian capacity allocation.
Air Niugini is to pursue a scheduled PNG-Japan service, based on the traffic growth generated with an increasing number of charters, which now face shut down because of pressure to restrict Kansai Airport to scheduled operations. While mapping his solutions, Maladina remains a realist, saying: "Most of the governments in the region are revising their air-service policies in a liberalised way, allowing for increased capacity and multiple designation. We have to be more prepared and more competitive in this new environment. I've told my people, 'you have to think pro-actively'. The days are no longer with us when we used to run to the Government."
Searching for in-house efficiencies, Maladina has amalgamated his ground services and commercial divisions, and his next step is likely to put flight operations and engineering under a single operations director. He has also seen the assets of a recently departed senior executive frozen pending investigation of an apparent $20 million sale of airline-owned spare parts, in which the funds were paid into a bank in the Channel Islands in the UK. A former expatriate colleague is also under investigation. Corporatisation and ensuing privatisation are now in train, because of restrictions imposed by the World Bank to preclude the Government from injecting new capital, which the business urgently needs.
"We're grossly undercapitalised, at about $6 million, with a turnover of $145 million. Some of the fleet is well over 20 years old, so we need money for equipment, and we need to be recapitalised for our own survival. We have about 1,800 employees, but if anything that will reduce, as part of current cost-saving measures. Traffic has increased recently. At the moment, we're operating at about 11% above budget and, because of our other measures, financial performance has improved," says Maladina.
Air Niugini is evaluating five regional-turboprop types as potential replacements for its two Dash 7s and at least some of the F28s."I think, geographically, we always have to have more than one type, preferably three: one, at least, to cater for the international long haul, another to cater for the domestic jet-aircraft routes, and the other for the smaller airstrips," Maladina says.
It may be the airfield conditions, which ultimately determines re-fleeting and privatisation outcomes. "The Government has given assurances, but it's one thing to give assurances, and another thing to deliver, so we can only proceed on the basis of what's available now. We have had to pay out of our pockets to maintain certain airfields, and it's a struggle to get the Government to reimburse us," says Maladina. Privatisation is likely to resolve that, along with the chronic problem in recovering Government travel debts. "We are continually asking for repayment. There's a feeling that Air Niugini is a public-statutory authority owned by the Government, and that their debt can wait," Maladina concludes.
Source: Flight International
