The Government of Samoa has selected Virgin Blue as the "preferred partner" for a new joint venture airline that will take over the long-haul jet operations of Polynesian Airlines, through a bidding process developed and supported by the International Finance Corporation.

Discussions are now underway to develop and conclude a strategic investment and management agreement between Virgin Blue and the Government of Samoa during the first half of 2005. IFC, the private sector arm of the World Bank Group, advised on the bidding process and will continue to help the Government to complete the transaction.

Air New Zealand and Qantas also submitted proposals to the Government of Samoa. These established airlines qualified as bidders based on experience in the efficient and successful management and the operation and maintenance of an international airline. Following a formal evaluation of proposals received from the three interested parties, Virgin Blue was selected as the most suitable partner for Samoa...’s national carrier.

...“The new strategic partnership between Virgin Blue and Poly Air has the potential to have a major positive effect on Samoa...’s tourism sector,...” 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 Polynesian Airlines transaction is part of a broader government strategy for reforming state-owned enterprises to promote economic stability and higher growth through the private sector. Annual subsidy to the airline had amounted to over half of the government's budget deficit in the most recent fiscal year. The government of Samoa is thus looking for an alternative that will preserve vital transport links while making participation attractive to a commercial operator interested in operating the airline without government subsidies.

IFC received a mandate from the government in 2004 to undertake a strategic review of the airline and undertake a process of private sector participation in the airline...’s operations, which would reduce and eventually eliminate state support for the sector. After completing the review earlier in July, IFC assisted the government's solicitation of bids for the transaction. IFC...’s key tasks now are to assist the Government of Samoa in the negotiations to conclude the formation of the new joint venture airline.