Fiji regime seizes control of Air Pacific off Qantas

Fiji's military regime said it had seized control of national carrier Air Pacific from Australia's Qantas Wednesday because it did not want foreigners to own or control Fijian airlines. The South Pacific nation's government, which took power in a 2006 coup, denied the move amounted to nationalisation, saying it fixed an anomaly that gave Qantas control of the carrier while having only a 46.3 percent stake. "(The) government has now corrected the activities of prior Fijian governments, which allowed foreign citizens to control Fiji's national airlines," it said in a statement. However, the government's decree, which cannot be appealed, may create jitters in the business community after previous disputes between the regime and international corporations. It also increases government control over key assets ahead of elections that military strongman Voreqe Bainimarama has promised will take place in 2014. The government owns 51 percent of Air Pacific and has been in negotiations with Qantas to purchase the Australian carrier's stake since at least 2010 but talks have stalled over a price. Qantas is reportedly demanding about $40 million from the cash-strapped Fiji government and has suggested a programme of asset sales at Air Pacific to help Suva meet the asking price. The government denied the latest move was prompted by failure to reach agreement over the Qantas stake, saying it needed to regain control of an asset vital to the country's struggling economy. It said the Australian carrier had effective control of the airline "through supermajority and veto rights", giving rise to concerns about a potential conflict of interest. "While Qantas currently has veto power over most areas of Air Pacific's operations and business decisions, Qantas also competes directly against Air Pacific through its wholly-owned, low-cost carrier subsidiary, Jetstar," it said. However, Qantas denied it held any such veto, adding it would assess the implications of Suva's action on its shareholding in the airline, which posted a loss of Fj$3.6 million ($2.0 million) in the 12 months to March 2011. "Qantas does not have veto power over Air Pacific’s operational decisions nor do we have effective control over the airline," it said in a statement. "We are a minority shareholder." The government dismissed any suggestion the move was a de facto nationalisation of Air Pacific. "That is absolutely false and misleading," it said. "Ownership of shares remains with Qantas, and dividends will be paid as and when declared." The government installed by Bainimarama after a bloodless coup in 2006 rules by decree, meaning those affected by its decisions have no right to appeal through the courts. In 2010, Bainimarama's government tightened media ownership laws, forcing Rupert Murdoch's News Corp. to sell its Fiji Times masthead, at the time a feisty critic of the Fiji regime. The US-owned bottled water firm Fiji Water temporarily closed its operations on Fiji's main island Viti Levu in 2010 when the government hiked the tax on water it extracts from a local aquifer by 5,000 percent. While the dispute was eventually settled, Fiji Water executives said at the time that Fiji was becoming "increasingly unstable and becoming a very risky place in which to invest". The IMF, in a rare foray into domestic politics, said last month that the government needed to provide clarity about its plans for elections in 2014 to increase investor confidence and boost economic growth. Since then, Bainimarama has announced plans to finalise a new constitution in 2013 ahead of elections a year later, although some critics question if he will relinquish power after breaking a previous pledge to hold a vote in 2009.