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Inaugural Flight of Polynesian Blue Establishes Novel Public-Private Partnership


WEBWIRE

EMBARGOED UNTIL 2.00 PM OCT. 30 (NEW ZEALAND TIME)
Sydney, October 30, 2005—The inaugural flight of Polynesian Blue Limited between Auckland, New Zealand and Apia, Samoa on Sunday, October 30 marked the beginning of a public-private partnership that offers a model for how state enterprises can be improved through private investment and management. This International Finance Corporation Advisory Services-led transaction established a unique solution to meeting the air transport needs of Samoa while eliminating the unlimited subsidy previously provided to Polynesian Airlines by the Government of Samoa.

Polynesian Blue will take over the former loss-making long-haul international jet routes of Polynesian Airlines, while the restructured Polynesian Airlines will operate only regional and local turbo-prop flights.

Polynesian Blue is a joint venture between the Samoan government and Australia’s Virgin Blue. IFC devised a competitive process to select the new partner. Virgin Blue’s proposal stood out because it will allow the Government of Samoa to reduce budgetary contributions to it’s airline, guarantee air transport access to Samoa; and contribute to the development of tourism.

“The new strategic partnership between Virgin Blue and the government of Samoa creates a model for resolving issues related to state enterprises” said IFC’s Advisory Services Director Bernard Sheahan. “The transaction will improve air transport links to this small island state while having a strong positive impact on the government’s budget. It will also contribute to the regional objective of better coordination of air services among the islands and the wider South Pacific region.”

The transaction will result in:

* Savings for the national budget of at least WST 10 million annually (US$3.8mm)
* Significant reduction in air fares from current fare levels
* Guarantee of competitive air transport access to Samoa without the financial burden of running an unprofitable airline
* Efficient and reliable air transport access to Samoa
* Increased penetration in the tourist markets of Australia and New Zealand—the future of Samoan tourism

The transaction provides added impetus to government sector reform agenda for the development of Samoa. It also supports efforts to diversify the economic base of Samoa and improve the tourism sector. Globally, it is the first time that a low-cost carrier will participate in an airline privatization—an innovation that helped ensure that the winner can meet the privatization challenges. The Virgin Blue model has successfully increased tourist arrivals by over a third within the first three years in other markets where it operates.

The joint venture will be run on as a profitable, commercial basis. The Government of Samoa will contribute financially to the operation of any routes it requests in the future that do not meet the joint venture’s criteria for maintaining profitable operations.

The Development Collaboration Partnership (DevCo) and AusAid were the principal donors that funded the advisory assistance extended by IFC to the Government of Samoa.

IFC’s Advisory Services Department provides advisory assistance, primarily to governments, on private sector participation in the provision of infrastructure services. For more information on IFC’s Advisory Services department, visit http://www.ifc.org/Advisory.

The International Finance Corporation, the private sector arm of the World Bank Group, promotes sustainable private sector investment in developing and transition countries, helping to reduce poverty and improve people’s lives. IFC finances private sector investments, mobilizes capital in the international financial markets, helps clients improve social and environmental sustainability, and provides technical assistance and advice to governments and businesses. Its 178 member countries provide its share capital and collectively determine its policies.

From its founding in 1956 through FY05, IFC has committed more than $49 billion of its own funds and arranged $24 billion in syndications for 3,319 companies in 140 developing countries. IFC’s worldwide committed portfolio as of FY05 was $19.3 billion for its own account and $5.3 billion held for participants in loan syndications. For more information, visit www.ifc.org.



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