Fiji's military government says it is taking control of the country's national carrier Air Pacific from Australian company Qantas.
The government of Commodore Frank Bainimarama has issued a decree saying that all Fijian-registered carriers must now be owned and controlled by Fijian nationals.
Fiji already owns a majority stake in the airline, holding 51 percent of it while Qantas owns 46.3 percent. But Fijian Attorney General Aiyaz Sayed-Khaiyum said Qantas since 1998 has exercised effective control over the carrier because Qantas-appointed board members enjoy supermajority and veto rights.
Qantas said it would issue a statement later Wednesday.
"It's an open secret that Qantas has proposed to sell their stake to the Fijian government," said Sayed-Khaiyum.
He said the two groups haven't been able to agree on a price and that Fiji is hoping Qantas will agree to a binding independent valuation of its stake. He added the decree has nothing to do with the potential sale.
However, the Fijian government's latest move could negatively impact the value of the stake to Qantas and to any interested third parties.
In a question-and-answer statement on the change, the Fijian government said it is "false and misleading" to think Fiji is nationalizing the airline and depriving Qantas of its shareholder rights.
Qantas will retain its ownership stake and its right to dividends, according to the Fijian government, but will no longer be able to exercise control over the annual operating budget, the appointment of the airline's chairman, the addition of new routes or a host of other management decisions.
Fiji claims Qantas has been directly competing with Air Pacific through Qantas's wholly owned subsidiary, Jetstar.
Air Pacific is responsible for carrying more than 70 percent of visitors to Fiji, the government said, making it a vital part of the tourism industry, which accounts for one-third of the Pacific island nation's economy.
Sayed-Khaiyum said Fiji has recently extended its diplomatic relations with a number of countries and would like to have the ability to fly to new places.
"We want to be able to expand beyond our region," he said.
In its last financial year, Air Pacific Group, which also owns a stake in a Fijian resort, reported an after-tax profit of 25 million Fijian dollars ($14 million) on revenues of 587 million Fijian dollars ($328 million).
Bainimarama has promised to oversee a process to introduce a new constitution to Fiji and to hold democratic elections in 2014.