Fiji's military seizes control of Air Pacific

MICHAEL FIELD AND MATT O'SULLIVAN
Last updated 16:57 28/03/2012

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Fiji's military regime has seized management control of Air Pacific, but denies it is nationalising the airline at the expense of minority shareholders including Qantas and Air New Zealand.

Air Pacific is 51 per cent state-owned, with Qantas, Air New Zealand and other Pacific states holding shares.

Military dictator Voreqe Bainimarama has imposed a military decree that he says will make Fiji comply with international conventions on aviation.

The new law stipulates that Air Pacific will have to be under the "substantial ownership and effective control" of the government, a Fijian citizen or a corporation which is at least 51 per cent-owned by Fijians.

The Civil Aviation Decree will also require that at least two-thirds of Air Pacific's board are Fijian, and that the airline is "under actual and effective control of Fijian citizens".

Behind the scenes, the military has been trying to force Qantas out of its shareholding but could never agree on a price.

Air Pacific was majority-owned by Fijians, but since 1998 the Fijian government has argued Qantas maintained effective control through super-majority and veto rights over significant parts of the airline.

In supplied questions and answers, the regime denies it is nationalising Air Pacific and depriving Qantas of its shares and shareholder rights.

"Since Air Pacific is responsible for carrying more than 70 per cent of visitors to Fiji, its success is critical to the health of the Fijian economy and the livelihoods of Fijians," the regime said.

"Ownership of shares remains with Qantas, and dividends will be paid as and when declared."

The loss-making airline has not paid dividends in years, and Air New Zealand has been resigned to holding onto its share.

The airline has been undercapitalised over the years due to a lack of money from the Fijian government, which makes Qantas' investment vital to the airline's future.

Qantas' budget offshoot, Jetstar, began flying between Australia and Fiji more than two years ago, which also made it difficult for Air Pacific to stem its losses. Virgin Australia also competes on the route.

Air Pacific has been undergoing a major restructure under its chief executive, Dave Pflieger. The airline reported a profit of F$25 million ($17.2 million) for the year ended March last year, compared with a loss of F$59m previously.

Comment was being sought from Qantas.

Two years ago Fiji also forced Rupert Murdoch's News Ltd out of Fiji, making it sell its daily Fiji Times to nationals.

- Stuff.co.nz and Sydney Morning Herald

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