Air Vanuatu in Financial Trouble as Receivers Called In

Passengers were stranded as the liquidation took immediate effect, but EY says it is optimistic the airline can return to profitability.

An aerial view of Erakor island and the coastline of Port Vila, Vanuatu on Dec. 7, 2019. Mario Tama/Getty Images

The Vanuatu government has placed its flagship air carrier into liquidation in response to a “challenging period.”

Flights will stop immediately, with many antipodean passengers left stranded away from home.

Ernst & Young (EY) confirmed via a statement they had been appointed voluntary liquidators of the airline which has 362 employees, and said it came after a “challenging period for the global aviation industry, including labour shortages, inflation affecting input costs and a global increasing cost of credit environment.”

“Air Vanuatu has been particularly affected by disruption of tourism activity due to cyclones,” read the statement.

Air Vanuatu said all flights scheduled for this week were cancelled, and from Sunday, flights were “under review.”

The sudden halt to services has left many travellers stranded from home, but EY has confirmed return flights will be organised saying, “Affected travellers will be informed of this disruption and re-booked on flights as soon as operations resume.”

Aside from suffering from the downturn in the airline industry, Air Vanuatu’s financial woes were compounded by mechanical issues with its only 737 plane, a vital link between the islands and Australia and New Zealand.

In September 2023, 20 international flights had to be cancelled or rescheduled after aircraft were grounded in Brisbane awaiting a mechanical part for repairs.

Hopes of Flights Restarting 

Vanuatu’s Finance Minister John Salong gave assurances things would return to relative normalcy while under administration, and that Air Vanuatu was “critical” to the people, as well as being of strategic importance.

“The first thing they have to do is, one, assure the employees that it’s business as usual, so they can take care of the customers that are currently stranded and customers that have been making bookings,” he told ABC.

“The second thing is, of course, to look at ensuring that everything is safe, because we’re talking about aircraft being in the air and safety has always been paramount for Air Vanuatu. The third thing is to deal with the suppliers so that we can have all the necessary processes in place so the business can run as per usual—so it may take a couple of weeks,” Mr. Salong said.

EY advisor Morgan Kelly said they were working hard with partner airlines to mitigate travel disruption.

“At the moment we’re working with all of our partner airlines, our codeshare airlines, and we’re also working with other operators and the Vanuatu government agencies to try and come up with a solution as quickly as we can,” Mr. Kelly said.

Outlook 

Some positive news concerning the airline’s future did emerge from EY who said the outlook was good, and its liquidators intended to resume trading as soon as practicable “while considering all opportunities to place the carrier on a stronger footing.”

The first meeting of creditors will be scheduled shortly, while the current management team will remain in place.

New Zealand and Australia’s ministries of foreign affairs have issued travel advice to affected passport holders.

Background 

Founded in 1981, Air Vanuatu has grown to become a key player in the region’s aviation industry, serving both domestic and international routes including Australia, New Zealand, Fiji, and New Caledonia.

The national airline also plays a crucial role in providing links between Vanuatu’s 83 islands, many of which are remote and sparsely populated, ensuring that residents have access to essential services, such as healthcare, education, trade, and tourism.

Air Vanuatu operates a modern fleet of aircraft, including a Boeing 737 for international flights, and ATR 72s for domestic routes.