Air Vanuatu Cancels Flights, Stranding Thousands as Airline Faces Liquidation

Air Vanuatu has cancelled all international flights until May 20, 2024, and is considering voluntary administration, leaving 1,458 seasonal workers and countless holidaymakers stranded. The airline's decision has affected travelers like Amon, who had his flight cancelled without notification and only found out through the news.

Why this matters: The collapse of Air Vanuatu has significant implications for Vanuatu's economy, which heavily relies on tourism, and may have a ripple effect on the entire region. The disruption to air travel could also have long-term consequences for the country's connectivity and ability to attract visitors.

The Vanuatu government appointed liquidators Morgan Kelly, Justin Walsh, and Andrew Hanson of Ernst and Young Australia (EY Australia) as Voluntary Liquidators of Air Vanuatu (Operations) Limited on May 9, 2024. The liquidators will conduct safety and maintenance checks before resuming normal operations. Cath O'Brien, executive director of the Board of Airline Representatives of New Zealand, advises passengers to "sit tight, await news from the airline or the administrators, and not travel to the airport" as the situation unfolds.

The airline's financial troubles stem from long-standing issues dating back to 2000. The Vanuatu government recently paid VT640 million for the lease of Air Vanuatu's ATR aircraft instead of purchasing a new plane. The Boeing 737-800, currently grounded in Melbourne, has been repossessed due to non-payment of lease fees amounting to VT541 million. Maintenance costs for the aircraft are unaffordable for Vanuatu.

Prime Minister Charlot Salwai confirmed that safety and security are paramount for continuing services. The government is working with other airlines, including Air Nauru, Virgin Australia, and Fiji Airways, to restore international flights for the 4,000 current international bookings. Solomon Airlines has made its first flight, carrying the Permanent Secretary of Foreign Affairs delegations and board of directors.

The liquidator will assess all incoming demands to ensure profitability, working closely with the shareholders to develop future plans for Air Vanuatu. The government, as one of the creditors, has loaned a significant amount to the airline and holds security over the loans obtained from BRED Bank and Vanuatu National Provident Fund (VNPF). Prime Minister Salwai addressed rumors about the government borrowing money from the VNPF, stating that no such borrowing has occurred.

As of Monday, 53 New Zealanders were still registered as being in Vanuatu and had to make their way back on alternative airlines. New Zealand's Ministry of Foreign Affairs and Trade (Mfat) advised affected travelers to seek updated flight information from their travel agent or airline and to contact their travel insurance provider. However, insolvency events are often not covered by travel insurance.

The collapse of Air Vanuatu has raised concerns about the impact on Vanuatu's tourism sector, which contributes 40% of the country's gross domestic product. Deputy Prime Minister Winston Peters arrived in Vanuatu in May 2024 as part of his government mission to Melanesia and is expected to meet with the Vanuatu Prime Minister to offer support and discuss the situation. Local businesses, such as Regina Toa's handicraft market stall in Port Vila, rely on tourists to buy products and are facing challenges due to the airline's demise.

The future of Air Vanuatu remains uncertain as the liquidator works to assess the airline's financial situation and develop a plan for its operations. The Vanuatu government is actively seeking solutions to restore international flights and minimize the impact on the country's vital tourism industry. Deputy Prime Minister Peters emphasized the importance of finding a quick resolution, stating, "We would hope that they've got a solution as quick as possible both domestically, because It's so important for its interconnectivity, but also internationally; this is a tourist hotspot. "

Key Takeaways

• Air Vanuatu cancels all international flights until May 20, 2024, stranding 1,458 workers and holidaymakers.
• Liquidators appointed to assess airline's financial situation and develop a plan for its operations.
• Vanuatu government seeks solutions to restore international flights and minimize impact on tourism industry.
• Airline's financial troubles stem from long-standing issues, including unpaid lease fees and maintenance costs.
• Tourism sector, which contributes 40% of Vanuatu's GDP, faces significant disruption and uncertainty.