Air Vanuatu: What Happens When An Airline Goes Bankrupt

On May 10, Air Vanuatu canceled all flights and grounded their planes. Shortly after, the airline went into liquidation. This left thousands of passengers booked with the airline stranded in the small Pacific island nation of Vanuatu. That being said, what happens when an airline goes bankrupt? 

Air Vanuatu Files For Liquidation After Ceasing Operations

In recent years, the South Pacific airline has been struggling with labor shortages, rising operating costs, increased interest rates, and weather-related issues. These factors have combined to create the perfect situation for a decline in tourist numbers and passengers flying to Vanuatu with the country's flag carrier. 

On May 9, Air Vanuatu announced that it was filing for Chapter 11 bankruptcy protection shortly after canceling all international flights. The reason the airline provided passengers with for canceling all of its international flights was due to “extended maintenance requirements”. 

These canceled flights left thousands of passengers stranded in Vanuatu. Morgan Kelly, one of the appointed liquidators for Air Vanuatu, had this to say in regards to the carrier: 

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

Prior to entering liquidation on May 10, Air Vanuatu flew scheduled flights to six international destinations - Nadi (NAN), Auckland (AKL), Brisbane (BNE), Sydney (SYD), Melbourne (MEL), New Caledonia (NOU). These as well as over 20 domestic destinations. 

What Happens Now? 

Air Vanuatu plays a pivotal role in connecting Vanuatu and its 83 islands to the world. The airline brings in valuable economic revenue through tourists and important goods through cargo. As such, the voluntary liquidators appointed by Australian firm Ernst & Young (EY) to handle the airline have stated: 

“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.”

The Vanuatu Tourism Office has apologized to travelers affected by the disruption.

Passengers Stranded

When an airline goes bankrupt, it is typical that thousands of passengers are left stranded at that bankrupted airline's destinations and hubs. The situation with Air Vanuatu is no different. 

Depending on how many people are stranded due to an airline going bankrupt, either airlines or governments will step in to get stranded passengers back home. 

In the United Kingdom, for example, the Civil Aviation Authority (CAA) maintains a fund where airlines pay £2.50 for each passenger they fly, which goes into a general fund that can be used to repatriate that airline's passengers should the carrier go bankrupt. British taxpayers cover the rest of the cost of repatriation flights. 

This fund was most notably utilized in 2019, when Thomas Cook Airlines went bankrupt, stranding thousands of British holiday makers abroad. The CAA responded by offering British citizens a lift home. 

The CAA chartered several aircraft to get stranded Thomas Cook passengers home. Most notably, a Malaysian Airlines Airbus A380-800 was used due to its high passenger capacity. At the end of the operation, the CAA chartered over 530 flights to bring British citizens home following the collapse of Thomas Cook. 

While the magnitude of stranded passengers is not that large with the situation at Air Vanuatu, the issue is still significant. Australian flag carrier Qantas has stated that it is “supporting” codeshare passengers booked on Air Vanuatu. 

The Vanuatu Tourism Office has commented that it is in discussions with Virgin Australia and Fiji Airways about flying stranded passengers back home or to their destinations. Fiji Airways has already sent one of its Boeing 737 aircraft to Vanuatu to pick up stranded Fijians.