Papua New Guinea (PNG) flag carrier Air Niugini continues to edge closer to complete collapse, with the Government apparently setting aside salvage proposals put forward by Qantas.

The airline was temporarily rescued from insolvency on 13 March when PNG Prime Minister Bill Skate compelled the country's main bank, PNGBC, to provide another Kina15 million ($8.3 million) overdraft facility.

Air Niugini is now believed to have run up debts of around Kina135 million, the bulk of which is short term. The airline is technically insolvent and with operational cutbacks in prospect, the flow of cash could slow further.

On 2 April, the carrier announced it would close its route to Kansai and sell one of its two Airbus A310s to raise Kina20 million, with another Kina10 million promised from cost-cutting measures. Problems have been exacerbated by the decision of major international mining companies operating in-country to ban their staff from flying on the airline.

Qantas, which codeshares with Air Niugini, has put forward four rescue options, but the PNG Government has so far failed to take them forward and parliament is now recessed. Qantas is awaiting a report by Australia's Civil Aviation Safety Authority on infrastructure shortfalls in PNG.

Sources also point to continuing political interference in Air Niugini over issues such as management appointments, scheduling and fleet acquisition. The carrier has also suffered from a Government order to peg fare increases, despite rising US dollar costs at Air Niugini.

Source: Flight International