Air Vanuatu files for bankruptcy protection after canceling all international flights

MELBOURNE, Australia -- Air Vanuatu filed for bankruptcy protection on Friday a day after the South Pacific state-owned carrier cancelled all international flights, stranding thousands of travelers.

The airline on Wednesday cancelled more than 20 flights to and from the Australian cities of Sydney and Brisbane, and the New Zealand city of Auckland for the rest of the week. The airline said it was the result of “extended maintenance requirements” on their aircraft.

Ernst & Young Australia’s Morgan Kelly, Justin Walsh and Andrew Hanson were appointed liquidators in an equivalent of a U.S. Chapter 11 bankruptcy, the firm said in a statement. The liquidators said safety and maintenance checks would be made before normal operations resumed.

Kelly said the airline’s existing management team would remain in place.

“Air Vanuatu is critical to the people of the Republic of Vanuatu and a strategically important business to the nation,” Kelly said. “Our team is working closely with management to ensure continuity of service to customers and to ensure services continue as seamlessly as possible.”

“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,” he added.

Affected travelers would be informed of this disruption and rebooked on flights as soon as operations resumed, the statement said.

Air Vanuatu operates four planes, including one Boeing 737 and three turboprop planes.

Tourism contributed 40% of Vanuatu’s gross domestic product.

The Vanuatu Tourism Office apologized to travelers for the disruption.

“This is an evolving situation and we will continue to post updates,” the office said in a statement.

The office's chief executive Adela Issachar said the administrator was in discussions with Virgin Australia and Fiji Airways, airlines that currently service Vanuatu, about flying stranded passengers.

“The updated schedule should be advised soon so we're all looking forward for that,” Issachar told Australian Broadcasting Corp.

Kelly said Air Vanuatu had been impacted by labor shortages, rising operating costs, elevated interest rates and tropical cyclones on tourist numbers in recent years.

“We’ll be looking at all options. And the Vanuatu government has indicated that they would prefer to resume operations as quickly as possible. Our role as voluntary liquidators will be to look at to assess all options to achieve that and make that sustainable,” Kelly told reporters.

“So that might involve some kind of sale process, it may involve some kind of partnership arrangement with another airline,” Kelly added.

Australian tourist Sally Witchalls said she and four friends had been checking out of their Port Vila hotel on Wednesday morning when they were told at reception that their Air Vanuatu flight would not fly that day.

She has since discovered that her travel insurance did not cover an airline going into voluntary administration, as Air Vanuatu had done, or bankrupt.

“We’re now on our own working out how we pay for the accommodation from here on out while we wait to see how the situation with Air Vanuatu unfolds,” Witchalls told ABC.