Airlines PNG on track to deliver profit in 2010

The Group has achieved a K9 million positive turnaround on the corresponding period in 2009 and is tracking ahead of its plan to deliver a profit in the 2010 financial year.

Operating revenue for the period was up 35% to K95.8 million while direct costs and overheads were up by 15.7% as a consequence of the Airline's increased operational activities.

The revenue increase is attributed to new long term contracts that were operating for the full six months and growth in the Airline's domestic Regular Passenger Transport (RPT) operations.

The K6 million loss in the first six months of 2010 is expected to be offset by the seasonal increase in traffic during the second half as the market customarily experiences increased passenger demand and profitability particularly as a result of the higher concentration of holiday periods including Christmas.

A continuation of this trend together with the commencement of key charter contracts in June and August as well as additional RPT operations over the period are expected to deliver a profitable return in the second half sufficient enough to result in an overall profit for the 2010 financial year.

Underpinning the 2010 profitable result are:

• forecasted annual operating revenue of more than K230 million;
• forecasted 81% increase in charter revenue over last year;
• enhanced yield management resulting in a forecasted 24% increase in RPT revenue over last year despite less available seat miles due to the redirection of capacity to charter operations;
• increase in Brisbane international passengers of 59% year on year: and
• re-allocation of capacity to more profitable routes.

The Group continues to have one of the strongest balance sheets of any airline in the region based on the following data as at 30 June 2010:

• debt equity ratio of 62%;
• loan value ratio of 51%;
• K185 million of aircraft and property with only K74.8 million in debt, including the overdraft which is offset by other cash balances as represented in the statement of financial position; and
• approved financing in place for fleet expansion.

Airlines PNG is well poised to deliver profitable results with its ability to attract and maintain long term charter contracts with clients including Esso Highlands Limited and Newcrest Mining Limited whilst continuing to develop its international and domestic RPT operations.

There are, however, still a number of developments that the Airline is required to undertake in order to ensure delivery of consistent positive results.

These include securing additional capacity and crewing resources.

The Board and Management will continue to pursue financially responsible options in this regard.