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The lies that keeps on flying: Fiji Airways CEO hurriedly summons local media to "explain" away Waqavuka Financial Ltd and FNFP's $200m loan while refusing to answer any questions from Fijileaks Investigation Team

19/9/2013

18 Comments

 
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While Fiji Airways CEO Stephan Pichler and the airline's PRO Shane Hussein and FNFP CEO Aisake Taito refused to answer any questions from Fijileaks Investigation Team researcher VICTOR LAL who is investigating the "Scam in the Sky" deal involving Fiji Airways, Fiji National Provident Fund, the Fiji government and Waqavuka Financial Ltd in Ireland, the new Fiji Airways CEO was hurriedly rolled out to explain in "detail" to the local media the relationship with Waqavuka and its part in the acquisition of the three Airbus aircraft. Fijileaks believes the questions and answers were carefully formulated in the hope of pre-empting the airbus scam Victor Lal will be revealing to the general public via Fijileaks.
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19 September, Fiji Sun

Fiji Airways CEO refutes claims on Waqavuka


By RACHNA LAL

Fiji Airways managing director and chief executive, Stefan Pichler, yesterday laid to rest allegations and concerns over the ownership of the airline’s new Airbus A330 aircraft. Questions have been raised about the ownership of the aircraft, following numerous allegations on anti-Government blogs and social media.

Mr Pichler has outlined the facts regarding the ownership of three brand new aircraft, arrival of which led to enormous national pride. The new A330s are an integral part of Fiji Airways’ plans to restore the national carrier to its role of a proud flying ambassador for Fiji.

Mr Pichler explained technicalities behind the financing structure as Fiji Airways bought new aircraft, to replace ageing and expensive leased aircraft. He refuted claims about the purchase.

Here’s answers by Mr Pichler to a series of questions that have arisen.

1. Pictures show that the engine for the Airbus carries the Waqavuka name as the owners.

The engines belong to Fiji Airways, and follow the same financing structure as the aircraft itself. This structure is detailed further below.

2.   Are the engines fitted to the A330 planes subject to a user pay arrangement similar to the FEA bill?

Fiji Airways owns the engines, but in order to maintain them and support them whilst in operation and as part of the A330 Rolls-Royce purchase deal, we entered into a Total Care Services Agreement (TCA) with Rolls-Royce. The structure of this service deal is that we pay an amount per Engine Flight Hour (EFH) per engine to Rolls-Royce for covered services which include Engine health monitoring, Engine reliability improvement & reporting, Engine Maintenance Planning (EMP) service, Engine transportation, specialist line maintenance and Engine Overhaul services.That is best practice in our industry as it is the most efficient way to maintain and support our engines. It is a very typical inclusive arrangement that many airlines use, especially with Rolls-Royce.

3.  How was Waqavuka Financing selected and/or formed? Is Waqavuka a Fijian-owned company? What are the business activities of this company ?
Is it needed to get import credit from European banks. Does that mean Fiji Airways could not get the loan from European banks if it didn’t partner with the European Export Credit Agency (ECA) ?

Waqavuka Financing Limited is a wholly independent special purpose company based in Ireland, owned by neither the German banks (KfW IPEX-Bank and Helaba) nor Fiji Airways.

Its role is to ‘own the A330 aircraft’ until the German bank loans are fully repaid. Note that use of the word ‘own’ is a technicality, as this company is set up purely to hold the deeds of the aircraft while the loan is being paid.

Waqavuka Financing Limited is owned by a corporate managing subsidiary of Deutsche Bank. Neither Fiji Airways nor the German banks have any ownership interest in Waqavuka Financing Limited.

Once the loan is fully paid, the ownership is transferred to Fiji Airways. It is like a financial lease deal for a car or if you purchase a house or a flat. You will only get your title deed once you have fully paid.

Wakavuka Financing Limited exists only to help Fiji Airways with its European financing. It sits as a neutral party between Fiji Airways and its German lenders. Think of it as a warehouse, holding the deeds of each aircraft until the loan is repaid. The use of a “warehouse” company is necessary in order to obtain access to funding support from the European Export Credit Agencies.  That support from the European export credit agencies in turn reduces the interest rate which Fiji Airways has to pay to the German banks.

The company’s name was chosen by Fiji Airways staff to create a unique, truly Fijian link.

4.  Why do Fiji Airways and the German banks need Waqavuka Financing Limited in the middle?

This is a requirement of the European Export Credit Agencies (ECA). Unless an aircraft is owned by a neutral third party, the European Export Credit Agencies will not provide support for the financing.

Without support from the European export credit agencies, the interest rate payable by Fiji Airways would be much higher and result in higher airfares for our passengers – something we are always keen to avoid.

The reason that the European Export Credit Agencies insist on the aircraft being owned by a neutral third party is to make it easier to enforce their security/collateral if needed.  A neutral third “shelf company” is not likely to take steps to prevent the banks/European Export Credit Agencies from enforcing their security over the financed aircraft. The European Export Credit Agencies require this neutral third party to be located in a neutral jurisdiction to reduce the risk of local courts protecting local interests. Tax reasons make Ireland a good European location for this purpose.

The use of an intermediate company is a technique common in aircraft financing transactions, whether or not those financings involve the European or American Export Credit Agencies, whereas the Americans secure the loans for Boeing purchases.

For example, Fiji Airways used a very similar structure when it successfully financed the purchase of three B737s in the late 1990s. This is a standard aircraft financing technique, used by most airlines around the world in such transactions. All parties to the financing agreement used international aviation finance lawyers to verify and facilitate the creation of this financing structure.

5.  The ownership plates on the A330 aircraft are confusing, can you explain the rationale?

The ownership plates clearly identifies the party that currently owns the aircraft (Waqavuka Financing Limited), the party that holds the aircraft as security (mortgage) against the amounts lent by the German banks (KfW IPEX-Bank and Helaba), and finally the party to whom the aircraft will be leased until the loan is repaid (Air Pacific Ltd./Fiji Airways Ltd.).

The reference to “Air Pacific Ltd/Fiji Airways Ltd” is due to the timing of the financing co-inciding with the process we undertook to change our trading name from Air Pacific to Fiji Airways. The use of two names for the one airline was intended to avoid the need to replace the nameplates at a later date. This saved time and money.

6.  What happens if Waqavuka Financing Limited goes bankrupt?

As a practical matter, Wakavuqa Financing Limited will only enter into the loan documentation for these A330 aircraft, and will do no other business. Provided Fiji Airways continues to pay all amounts that Fiji Airways has committed to pay (under the financing contracts), then it is impossible for Wakavuqa Financing Limited to become bankrupt. Problems could only arise if Fiji Airways stops making the payments it is supposed to make under the financing contracts.

In this scenario of a default by Fiji Airways, Fiji Airways is in the same position as any defaulting borrower under a home mortgage – there is a risk that the lender/mortgagee will take its security (the A330 aircraft) and sell it. In this case, however, the German Banks will look first to the European Export Credit Agencies (who provide a guarantee of Fiji Airways). It will then be up to the European Credit Agencies to decide whether to repossess our aircraft and sell them.

This is an unrealistic scenario, as the Board of Fiji Airways will make all payments on time.

7.  Is the repayment to FNPF, coming from Fiji Airways’ operating profits ?

As our commercial arrangements with FNPF are confidential, we’re unable to discuss details of this in public. This would be a breach of our contract with FNPF.

But of course, Fiji Airways will repay the loan to FNPF (as stipulated in our agreement with FNPF) as to any other credit provider and this is part of the ongoing business plans. Of course the repayment of debt will impact profits every year.

The security of the pensions of all Fijians are not impacted at all, as FNPF also has a collateral against their loan.

8.  How do you perceive the public discussion of this issue ?

Well, in general we are a commercially run business and do not want to get involved in any political discussion. We adhere to international financing and regulatory standards and instruments in order to have a safe, secure and profitable airline.

We serve all Fijian people. But we don’t want to be part of any political discussion.

We have a business to run in tough global market conditions. And that is what we need to focus on


Fijileaks Editor: See also Fiji Times: "Mr Pichler took time out yesterday to discuss in detail the relationship with Waqavuka Financing Limited and its part in the acquisition of the three Airbus aircraft."
CEO explains Waqavuka
18 Comments
Fiji Airline Pilot
19/9/2013 09:46:42 am

Victor, I will give you my vote (and even my own life) any day than give my vote to politicians, aspiring politicians, parties, and trade unionists who are too busy with their heads up their ****trying to get into Parliament. What are they afraid of - why are they not asking any questions - keep sleuthing away, revealing the state of rottenness in Fiji Airways, and the country as a whole. We look forward to the truth and not the lies and deception of another wannabe airline CEO Pichler. As for Shane Hussein, he is a dumb ass and regime lackey; got his job because of his connection to Aiyaz Khaiyum, the Minister of Civil Aviation. It does explain why Khaiyum is holding so many crucial ministerial positions - so he and others can rip off the country! Shane is a buddy of Nirmal Singh, the chief spokesman of Peoples Democratic Party, and no wonder the idiot was in Fiji Airways airbus cockpit giving the thumps up to Picher's lies to us.

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FNFP Member and Prospective Storm Trooper
19/9/2013 09:59:42 am

I think it is time we, members, organized 10,000 of fellow FNFP members, and stormed the FNFP headquarters to get the whole truth. It has been going on for too long, all sorts of scams and abuse of our funds.

I read both the Fiji Times and Fiji Sun - and the stories are identical in both of them

Did Pichler and Fiji Airways hold a press conference or is it a press statement.

I read Shane Hussein's reply to Victor Lal of 16 September: "On another note, we are simply a business which tries to achieve a good performance and is subject to international standards in the various areas of our business.Therefore, we are also not in a space to enter any political debate."

Co-opt outing! And, curiously, the same but slightly twisted version is in the statement or press conference cited above: "Well, in general we are a commercially run business and do not want to get involved in any political discussion.. We serve all Fijian people. But we don’t want to be part of any political discussion.2

No, Shane and Pichler, you dont serve the people of Fiji - you are lying to the people of Fiji and to the FNFP members.

Its bloody time to organize, with or without the rat politicians and trade unionists - and remember, you young soldiers - your own FNFP contributed are abused by Taito, Khaiyum, Bainimarama, and now this Pilcher chap - where is David Pfielger this days - its time to ask FBI to investigate him.

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Bader
8/11/2013 11:43:49 pm

What a stupid comment from an anonymous wann-be pilot ! Pichler is one of the best turnaround CEO s in the airline industry. He saved us, Jazeera Airways from bankrupcy 4 years ago and we have been the most profitable airline in 2011 and 2012. So, after the new guy joined on 1 September, you probably have never met him or been impacted from his decisions, you call him names, of course anonymously. What a weak person you are. No fact finding, no idea, just typing shit...and you wanna be a pilot ? I don t think so.

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Sniper
10/11/2013 06:57:53 pm

well bader.....that your problem who gives a flying F****K about the CEO and the company he saved he saved..should be more transparent.....when comes down to FNPF.

Photographer Fijji
19/9/2013 10:18:22 am

Why haven't both Fiji Times and Fiji Sun published the actual photos which points to Waqavuka - for that way, we the people of Fiji and FNFP members could read for ourselves. It is time also to make a visit into newspaper offices to register our disgust with their own rolls in the cover up of FNFP members funds

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Rajesh link
19/9/2013 12:47:20 pm

Good on you Victor.Shane should be a shame of himself.He was very quick to interview me and confront us in SDL Govt refer SPG 2003 account. when he was with Fiji TV.
Why cant you ans simple question shane?.Tell the truth. that not regime fathers money.its fnpf members funds.Shame on you people and Fiji Media .who have no ethical standard to stand up and ask question to the regime AG.

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UFDF = U Fuckers Dont Fool us
19/9/2013 02:39:23 pm

What a pathetic bunch of so called leaders we have in Fiji. Tupeni Baba is challenging Bainimarama to "bring on the elections" while MPC is talking about reducing VAT. Last week they rejected the constitution. This week they are gearing up for elections. Well..that is ok. But do they talk about any of these burning people issues? Do they care about people? It seems all they want is to contest elections, win a seat or two, sit at the back bench, earn a living and ensure a pension. Do they have any ethics? Real leaders would storm in to FNPF with pensioners and ask real questions. Real leaders will think about people. What a country we live in. Please god give a leader who can lead us.

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Manoa
19/9/2013 03:14:49 pm

One of the products of independent journalism is that governments and corporations are kept on their toes and adhere to organisational transparency; something we rarely see here.

By using a shell company such as Waqavuka Finance it allows for creative accounting and "after hours" bookkeeping which is not required to be disclosed here in Fiji. Once lease payment is sent by Fiji Airways to Waqavuka, keep in mind Waqavuka was set up for this Airbus purchase, there is no oversight on how much or where the money goes from there.

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Big Deal
19/9/2013 08:06:30 pm

This shane cant even right proper english - how did he get the job? eg use of "capacity" - means they dont have ability to reply ,,,,,which is junglee english.
i read somewhere that airbuses are leased ....my understanding of lease is that it is rented and will be returned to owner....
can someone pls clarify.
Victor - pls also investigate what happened to all the leased govt hiluxes which was supposed to be returned to Asco. The head of prisons is now driving one but is now a private vehicle registered to him. I also saw one driven by Franks son with a private number plate. Who else is driving these hiluxes and how come they are now privately owned by regime cronies and relatives??
It is becoming more obvious that Fiji is run by thieves and scoundrels pretending to be moral leaders. YAVU SONA LELEVU BUTABUTAKO.

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ex-airpac
21/9/2013 02:28:02 am

If the author sought to check with the lenders of the loan he will get a simple and clear answer. Why would 2 german banks that are listed on the DAX stock exchange lend to fiji airways if the planes are being leased.

Victor may be smart and a very good investigative journalist but in this case he has taken the wrong bait and caught a "qitawa" instead of the priced big eye.

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annon
21/9/2013 02:37:58 am

I agree with ex-airpac.

Why would a bank lend to me to buy a house (aeroplanes) is I will only rent it (lease it). Victor should contact the lenders asap to confirm. He should publish their replies and be transparent.

I know another case where Victor published wrong infor about a reputable head of an insitution based on allegations by 2 of its staff. A friend of mine who worked for the same institution informed me that the allegations were proved wrong after a thorough investigation.

In this case, victor misses the point of the need to set up a shelf company. If he researches well, he will find out that a similar thing was done when air pac bought B737 from USA.

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invisible
22/9/2013 03:54:44 am

Ex-airpac and anon I agree with.

But naturally when there is a question of lease and ownership belongs to shelf company, there will be a concern. Then there should be a proper sale and purchase agreement with Fiji Airways that they should show how they will get the ownership transferred from shelf company after payment is finalised.

Victor should ask the shelf company to also explain and show agreeemnt with Air Pac on lease/ownership matter, as well as how much payment is sent towards loan and how much is used elsewhere as "administrative cost" to manage this monthly payment factor to the principal

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bk
22/9/2013 04:03:39 pm

You guys miss the point...Fiji Airways do not own the airbuses as the regime has been telling the people of Fiji...Lies Lies Lies; whats so hard about telling the people that Fiji Airways is leasing the planes???? you guys got it wrong.

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invisible
25/9/2013 02:42:36 am

Off course we are not missing the point. The point remains that all sides of the misleading response from Air Pac should be checked out. When has govt body ever spoken the truth in the past 25 years or so. Is this the first time?

So I shall add another point.

This is how airline security is played until payment is received in full as purportedly claimed and that reposession can only be possible if the ownership is with a shelf company until that happens.

Ramalpa clause says ownership remains with the seller until payment is received in full. So why lease at all as full security and ownership remains with the loaning bank in this case?

Secondly, if the loaning bank cannot reposess plane in the event of default of loan, how can the shelf company have bigger muscle to do the same?

Thirdly, why the loaning bank could not reposess plane if it was sold directly to Air Pac as loan was to air pac $200m from FNPF to purchase plane and not to lease?

Fourthly, did the loaning bank feel if Air Pac will not pay the bills, the plane will sit at Nadi tarmac and rot and not fly to another country from which they can reposess?

Keep The Faith link
23/9/2013 04:14:35 am

It would be unprecedented for any international lender to disclose any details pertaining to a private transaction would it not? Unless of course the relevant Irish Parliament sub-comittee saw fit to place this alliance under a microscope because an Irish company was aidding and abetting treason because The People of Fiji were not consulted on how their pension funds were being mismanaged.

Apparently it is commonplace for these types of ventures to occur in Ireland because

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Keep The Faith link
23/9/2013 04:22:25 am

(cont'd)
...aircraft leasing is a revenue earner for them.

However what would be of interest is what kinds of fees the Irish directors commanded for their efforts on 'Waqavuka' and whether there was a subsequent skimmed off 'admin' fee (how much, if so) to a third party deal-maker -- and consequently who this third party is (if any).

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abc
30/9/2013 10:49:27 pm

and Waqavuka is a legal vehicle for a scam...that's why you smart asses are guessing...no wonder the Taliban and the vuaka gets away with murder in Fiji...dumb asses

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sniper
10/11/2013 07:14:39 pm

Exactly HOW MUCH IS ONE PLANE........was $200 million still not enough to purchase a new airbus......someone's got to tell me what is going on.....

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