Fiji Aligns National Airline Ownership Requirements

Fiji Aligns National Airline Ownership Requirements with International Laws

SUVA, 28 March 2012 – To ensure compliance with international law and bilateral requirements governing air service rights granted to national airlines that fly to other nations, the Republic of Fiji has updated its ownership and control criteria for airline companies registered in Fiji through the passage of the Civil Aviation (Ownership and Control of National Airlines) Decree 2012.

“Fiji has long been out of step with the Chicago Convention and consequent international practices, and the bilateral requirements of other nations that govern visiting and domestic national air carriers,” said Attorney-General and Minister for Civil Aviation Aiyaz Sayed-Khaiyum. “By implementing this new law, Fiji will now comply with these international laws and requirements, as well as international best practices.”

The Civil Aviation Decree necessitates that all Fijian-registered air carrier companies providing international service must satisfy these international requirements and be under the “substantial ownership and effective control” of a citizen of Fiji, meaning:

• The Government of Fiji or any institution of the State;
• An individual who is a citizen of Fiji;
• A partnership each of whose partners is an individual who is a citizen of Fiji; or,
• A corporation or association of which at least 51 percent of the voting interest is owned and controlled by persons who are citizens of Fiji, at least two thirds of the board of directors and any committee are citizens of Fiji, and such corporation or association is under actual and effective control of citizens of Fiji.
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Currently, Air Pacific and Pacific Sun are Fiji's only international airlines, and they are majority-owned by Fijians. However, since 1998, minority and non-Fijian shareholder Qantas has maintained effective control of these airlines through supermajority and veto rights over significant areas of the company, including the appointment of the Chairman, Deputy Chairman, annual operating budget, any expenditures, new air routes, variations to Air Service schedules, management appointments, employee incentive schemes including bonuses, and numerous other key areas of oversight, control and decision-making.

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, which flies overseas visitors to Fiji from Sydney.

Concerns about ownership and control requirements are not unusual in international aviation law. Indeed, just last week Qantas called for the Australian International Air Services Commission (IASC) to undertake a comprehensive public review of Virgin Australia’s ownership and control position to determine if Virgin complies with the ownership and effective control provisions of Australia’s aviation laws.

In the European Union and United Kingdom, air carriers must be owned and effectively controlled by Member States and/or nationals of Member States. Similarly, in New Zealand international airlines must be owned and effectively controlled by New Zealand nationals.

With this law, the Bainimarama Government has now corrected the activities of prior Fijian governments, which allowed foreign citizens to control Fiji’s national airlines. Since Air Pacific is responsible for carrying

Fijian Civil Aviation Decree Question And Answer
The following questions and answers pertain to the passage of the Civil Aviation (Ownership and Control of National Airlines) Decree 2012.
Q. If this has been going on since 1998, why didn't you act before today?
A. We cannot speak for the actions or inactions of prior Fijian governments, which have allowed foreign citizens to control our national airlines. This situation only recently came to our attention following a routine investigation into these legal requirements.
Q. Isn't it true that you are simply nationalising Air Pacific and depriving Qantas of its shares and shareholder rights?
A. No. That is absolutely false and misleading. Ownership of shares remains with Qantas, and dividends will be paid as and when declared.
Air Pacific and Pacific Sun are Fiji's only international and regional airlines, and they are currently majority-owned by Fijians. However, since 1998, minority foreign shareholder Qantas has maintained effective control of these airlines through supermajority and veto rights over significant areas of the company including the appointment of the Chairman, Deputy Chairman, annual operating budget, any expenditures, new air routes, variations to Air Service schedules, management appointments, employee incentive schemes, and thirteen other key areas of oversight and control.
Fiji welcomes the investment of Qantas or any other overseas airline in our national carrier and its wholly-owned subsidiary. The Decree will not change the ability of Qantas and other foreign citizens who are current minority shareholders to remain as investors in Air Pacific and its wholly-owned subsidiary, Pacific Sun, or for them to sell their current shares or buy more shares. It merely requires that they have normal and customary minority shareholder and Board rights, and that per international requirements and laws, Fijians must have substantial ownership and effective control of the country's national airlines.
The Fijian Government encourages private sector investment and has moved to divest Government shares in numerous enterprises.
Q. Is this move a result of differences with Qantas regarding a price for its shares that it wants to sell and Fiji wants to buy?
A. No. That is absolutely false. Fiji welcomes the investment of Qantas or any other overseas airline in our national carrier and its wholly-owned subsidiary. The Decree will not change the ability of Qantas and other foreign citizens who are current minority shareholders to remain as investors in Air Pacific and Pacific Sun, or in any way affect their ability to sell their current shares or buy more shares. It merely requires that Qantas and all other minority investors have normal and customary minority shareholder and Board rights, and that per international laws and requirements, Fijian citizens must have substantial ownership and effective control of any current or future national airlines.
Q: How will this Decree benefit the citizens of Fiji?
A: The move by the Bainimarama Government now corrects the activities of prior Fijian governments, which appear to have allowed foreign citizens to control Fiji’s national airlines. Since Air Pacific is responsible for carrying more than 70 percent of visitors to Fiji and the tourism industry contributes 33 percent towards the Fijian GDP, its success is critical to the health of the Fijian economy and the livelihoods of Fijians. Fijians need a viable national carrier.
Q: Will this affect airlines that operate domestically?
No, foreign persons are allowed to own up to 100% of an airline that operates domestically.

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