Prime Minister Peter O'Neill announced the cabinet decision yesterday and details of the proposed merger would be "worked out" by a merger taskforce chaired by Public Enterprises Minister Sir Mekere Morauta, according to The National.
Independent valuations of each airline will be undertaken but Air Niugini is expected to have the major stake of the merged airline's equity, which would have a total fleet of 33 aircraft.
The new prime minister has reportedly since flown off to New York in the K120 million ($A55.6 million) Falcon passenger jet the government previously said it would sell.
O'Neill will be making an appearance at the United Nations General Assembly.
