Air Vanuatu in liquidation as search begins for a ‘strategic buyer’ to restore operations

Air Vanuatu has been placed into voluntary liquidation as the search begins for a buyer who can get the carrier back into the air.

Air Vanuatu liquidators are considering selling the airline to ‘strategic buyers’ in a bid to save the besieged company from collapsing, The Australian understands.

Ernst & Young Australia (EY) were appointed liquidators on Friday morning after the Vanuatu government-owned airline grounded dozens of flights earlier this week, leaving thousands of people stranded across the pacific.

Air Vanuatu confirmed on Thursday that all flights were cancelled until Monday so that the company could carry out maintenance and consider its options.

The Australian understands that EY liquidators are speculating over selling the airline to prospective governments and private buyers looking to swoop in on the estranged airline, which has suffered major tourism distributions in the past year.

It’s expected that buyers including the Australian government, as well as private equity players will look at acquiring the airline.

The Chinese government has not been ruled out as a potential bidder for the airline.

Meanwhile, Virgin Australia announced that at the request of the Australian Government, the airline would increase flights between Brisbane and Port Vila from three to five a week for the rest of May and June.

The additional services went on sale Friday afternoon with the first extra flight scheduled for Sunday.

Fiji Airways was also adding more flights between Port Vila and Nadi, to give Australian travellers the option of heading home via Fiji.

“We are saddened to learn of Air Vanuatu being placed into liquidation today,” Virgin Australia said in a statement.

Mystery Island in Vanuatu.

EY was brought in on Thursday to look at the airline’s financial records and within hours the decision was made to enter voluntary liquidation.

It’s understood a buyer will be sought for the airline, which operates only two aircraft with a view to restoring services as soon as possible.

Partner in strategy and transactions at EY, Morgan Kelly, said affected travellers would be informed of the disruption and re-booked on flights as soon as operations resumed.

“Air Vanuatu is critical to the people of the Republic of Vanuatu and a strategically important

business to the nation,” said Mr Kelly.

“Our team is working closely with management to ensure continuity of service to customers and to ensure services continue as seamlessly as possible.”

He said the outlook for the airline was positive despite pressures on the broader industry.

“We will be focused on securing the future of this strategically vital national carrier,” Mr Kelly said.

“EY Australia has a significant and successful track record working with aviation operators and airlines globally, utilising our highly experienced restructuring team.”

Reasons for the airline’s financial woes included “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.

The airline’s sole Boeing 737 which was used for its busy international schedule has been undergoing extended maintenance, creating difficulties for the carrier.

Air Vanuatu was relying on Solomon Airlines to assist but ran into more trouble when one of its aircraft required maintenance.

Qantas was last night encouraging codeshare customers booked on Air Vanuatu between now and May 31 to get in touch with them or their travel agent to discuss options.

“We will work to book any of these customers who are mid-journey onto alternative flights,” said Qantas — which does not fly to Vanuatu.

Virgin Australia, which operates four flights a week between Brisbane and Port Vila, was examining its schedule in the wake of the Air Vanuatu liquidation.

The airline was the second in the region to collapse in the last fortnight, following Bonza’s grounding on April 30.

A creditors meeting will be held on Friday with administrators Hall Chadwick expected to provide an update on Bonza’s financial situation.

The budget carrier no longer has access to aircraft after lessor AIP Capital terminated the leases on five Boeing 737 Max 8s, the first of which was taken out of the country on Thursday.

Liquidators have taken control of the business on Friday and will conduct safety and maintenance checks before the resumption of normal operations.

Originally published as Air Vanuatu in liquidation as search begins for a ‘strategic buyer’ to restore operations