Help is at hand for debt-ridden Air Niugini as an Australian businessman prepares an offer for the flag carrier.

Michael Bromley, a former chairman of Air Niugini, approached the Papua New Guinea government in late November. But Bromley was stopped from placing a specific bid on the table by the government's ignorance over the airline's worth.

'There has been talk of a book value anywhere between A$4 million (US$2.7 million) and A$16 million but they don't know how to assess the value and what the routes are worth, if they do have a value,' says Bromley.

While Air Niugini's worth may be unclear, its debts are evident. The airline nudged bankruptcy in 1996, and is laden with liabilities exceeding A$210 million and a debt:equity ratio of 15:1.

Bromley's offer came a week after management changes at the airline. The government ousted the carrier's managing director, Moses Maladina, while Maladina was overseas at a conference, replacing him with airline employee Chris Mek. The government claimed Maladina moved too slowly to replace a damaged aircraft. Minus an aircraft, Air NG was set to be short on capacity over the busy New Year period.

Maladina argues that replacing him will not resolve the airline's main problem, namely the need for a capital injection to replace its old and obsolete aircraft.

A source close to the carrier says that while the government remained somewhat reluctant to sell its flag carrier, it was tired of capitalising its operations, declaring that it was 'sick of being asked for cash to prop up the airline's operations'.

Tom Ballantyne

Source: Airline Business