The island nation of Vanuatu, with a population of slightly under 330,000, relies heavily on air travel for importing supplies and transportation off and onto the island. Located over 400 miles away from New Caledonia and approximately 1,200 miles from Brisbane, Australia, flying plays a crucial role in connecting Vanuatu to the rest of the world.
In May 2024, many residents feared isolation following the announcement of bankruptcy and immediate flight cancellations by Air Vanuatu, the country’s flagship carrier. However, the situation has since shown signs of improvement. Australia-based Ernst & Young liquidators, Morgan Kelly, Andrew Hanson, and Justin Walsh, intervened to explore either a turnaround plan or liquidation for the airline.
A favorable resolution was achieved when AV3 Limited, a special-purpose corporation owned by Vanuatu’s Ministry of Foreign Affairs, agreed to purchase Air Vanuatu. With this development, Ernst & Young shifted their role from liquidators to assisting the airline in restructuring its debt. A local court filing confirmed that the airline’s conditions for its creditors had been met, involving a structured payment of $3.3 million USD to lessors over a ten-month period.
If the airline fails to meet these payments, creditors, including international banks, retain the right to request a reversal of the agreement, potentially pushing Air Vanuatu back towards liquidation. Ernst & Young’s Kelly emphasized that the Deed of Compromise maximizes returns for creditors and offers Air Vanuatu a chance to operate, securing jobs and maintaining essential aviation services.
Air Vanuatu officially exited liquidation on October 11, with some domestic flights already operational. However, the airline has not announced when it will resume its international services to destinations like Australia, Singapore, and New Caledonia, which are vital for tourism. During the flight cancellations in May, some tourists found themselves stranded on the island, having to secure limited alternative flights or being rescued by a P&O Cruises Australia ship.
The bankruptcy was initially due to Air Vanuatu’s challenges in repairing its aircraft, which are essential for maintaining flight operations.
