Flights cancelled and tourists stranded as Air Vanuatu put into voluntary liquidation

Flights cancelled and tourists stranded as Air Vanuatu put into voluntary liquidation

Vanuatu has put its national carrier, Air Vanuatu, into voluntary liquidation, after it cancelled flights to Australia and New Zealand, leaving tourists stranded.

The Pacific island’s government made the decisions after representatives from accounting firm EY arrived in Port Vila on Thursday and conducted initial assessments of the airline’s financials.

The airline had cited extended maintenance requirements for its aircraft when it cancelled its flights through to Sunday.

Liquidator EY said the aim would be to resume normal operations as soon as possible after conducting safety and maintenance checks.

Air Vanuatu, which runs crucial routes connecting Pacific locations with Australia, has confirmed all scheduled international flights have been cancelled. Future flights are under review, with affected travellers to be rebooked as soon as operations resume.

The carrier operates only four planes between the country’s islands – which rely heavily on tourism – and to Australia, New Zealand and other South Pacific islands.

The Guardian understands a Boeing 737 in Air Vanuatu livery has been parked at Melbourne’s Tullamarine airport for months.

Virgin Australia is the only other airline aside from Air Vanuatu that operates scheduled passenger flights between Australia and Port Vila, with thrice weekly flights from Brisbane.

On Friday, a Virgin Australia spokesperson said the Australian government had requested it lift capacity in response to Air Vanuatu’s grounding. It will now fly five times a week between Brisbane and Port Vila throughout May and June.

Virgin Australia has also applied for, and expected swift approval, permission to fly more seats between the two nations, with plans to quickly launch a further seven weekly flights between east coast Australian cities such as Sydney and Melbourne – previously served by Air Vanuatu – and Port Vila.

EY said its appointment followed a challenging period for the global aviation industry, including labour shortages, inflation affecting input costs and credit costs.

Air Vanuatu has been particularly affected by disruption of tourism activity due to cyclones, it added in a statement.

“The outlook for the airline is positive, despite pressures on the broader industry, and we will be focused on securing the future of this strategically vital national carrier,” EY said.

“Air Vanuatu is critical to the people of the Republic of Vanuatu and a strategically important business to the nation,” said EY’s Morgan Kelly.

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

While a liquidation implies that a company will be shuttered, a potential relaunch is feasible given Air Vanuatu is a government-owned airline without the complexities of competing shareholders.

Companies can use a voluntary liquidation as a means to restructure operations and renegotiate terms on existing financing and leasing arrangements.

Airlines routinely restructure in a turbulent industry where aircraft and operating costs are expensive, and profit margins are sometimes thin.

Australian carrier Qantas Airways said it was supporting its code share customers who were booked on to Air Vanuatu flights.

With Reuters