PNG Air records K22.4 million loss

PNG Air has recorded a K22.6 million loss before abnormal items and tax. The abnormal items included ATR induction costs of K2.31 million and over K18 million from the required accounting treatment of future maintenance reserve recoveries being lost as a result of the early termination of aircraft leases. This is notwithstanding that the early returns are expected to generate substantial future benefits for the company, well in excess of those abnormal costs.

This was made known during the announcement of PNG Air half year results. Company directors said that the company is going through a transition phase with the introduction of its brand new ATR aircraft and is yet to acquire enough scale to maximise the benefits of the new aircraft. They also attributed the loss to the downturn in the PNG and global economies. Of particular note is the activity in the charter market for the resources sector which has tailed off. Bringing in the new ATR aircraft meant there had been some short term excess capacity in the company’s fleet and had also involved investment to upgrade infrastructure and systems.

The short term excess capacity has been addressed by the agreed return of leased aircraft and restructuring other aircraft leases. However company directors said that the short term loss augmented well for the company’s long term future, as it positions itself to capitalise on serving increasing demand when the PNG economy recovers and resource sector activity increases. This is part of the airlines plans to be the airline of choice in PNG. PNG Air will be introducing three more ATRs by the end of 2017. This will see more of the company’s flights with the ATR while regular passenger services can be expected to generate increased revenue and profitability in the longer term. The company is confident that its commercial strategy is the right one to underpin a sustainable and profitable operation in the future.