Air Vanuatu is the small national airline of South Pacific nation Vanuatu (as the name suggests). The airline was founded in 1981, when Vanuatu gained independence from the United Kingdom and France, and the airline was started with the assistance of (now defunct) Ansett Airlines.
Now, nearly 45 years later, the airline is on the verge of going out of business. The carrier has canceled international flights, the company’s board has been fired, and voluntary administration seems likely.
In this post:
Air Vanuatu’s issues with sole Boeing 737
Air Vanuatu has a small fleet consisting of just five aircraft, with only one of those planes being a jet. Specifically, the airline has a roughly eight-year-old Boeing 737-800 with the registration code YJ-AV8. The airline relies on this aircraft to operate its services to Australia and New Zealand.
Unfortunately in recent times, Air Vanuatu has been having issues with its Boeing 737. When you have only one aircraft capable of operating many routes, that makes it tricky to deal with any unscheduled maintenance (heck, even scheduled maintenance can be complicated!).
This has become especially problematic in recent times. In addition to the jet suffering maintenance issues in 2023, Air Vanuatu’s one aircraft has been grounded since January 2024, due to maintenance.
The aircraft hasn’t operated a commercial flight since January 14, 2024, so it has now been grounded for nearly four months. This has obviously proven problematic for the airline:
- It’s hard to be operationally reliable when you only have a single jet, and it’s grounded
- Air Vanuatu has been leasing aircraft to operate its services to Australia and New Zealand, though that’s costly as well; the airline is paying for the aircraft it’s leasing, and is also still paying for the plane that’s grounded
Recently, Air Vanuatu has been leasing a 24-year-old Nauru Airlines Boeing 737-300 with the registration code VH-XNU, as well as an 11-year-old Solomon Airlines Airbus A320 with the registration code H4-SAL.
Air Vanuatu’s financial issues become worse
While Air Vanuatu has been dealing with fleet issues for months now, the carrier’s problems have just become much worse. Air Vanuatu has just canceled all of its international flights in the coming days, which the airline describes as being due to “extended maintenance requirements.” Flights are officially canceled through Sunday, May 12, 2024, while flights after that date “are currently under review.”
A spokesperson for the airline confirms that the airline is considering entering voluntary administration, has fired the board, and that a company has now been hired to manage this process:
“The Vanuatu government is now considering placing Air Vanuatu, the national carrier of Vanuatu, into voluntary administration. The international firm Ernst & Young has been appointed to assist the Vanuatu government in reviewing available options and put forward recommendations to the Vanuatu government. Ernst & Young representatives arrived in Port Vila today to begin an assessment of Air Vanuatu’s financials and are being assisted by the Vanuatu Government and the Air Vanuatu team.”
Air Vanuatu has been saddled with debt for years. So the airline hasn’t been able to invest in actually modernizing and having a more reliable fleet, but has instead been spending money on maintaining its current fleet, and now leasing aircraft from other airlines.
It goes without saying that this isn’t a recipe for success. The government of Vanuatu has been looking to privatize the airline, but hasn’t had much success. Investing in an airline is a questionable move under the best of circumstances, let alone when we’re talking about a tiny airline in a remote part of the South Pacific.
I’m curious to see how this plays out. What makes this more challenging than your typical airline with financial issues is that the country very much relies on Air Vanuatu for connectivity within the South Pacific, including to nearby islands.
Is the country okay with just ditching its airline, and having a lot less air service? This could have major implications for the transport of both passengers and cargo to the nation.
Bottom line
Air Vanuatu has been having financial issues for quite some time, only made worse by the fact that the carrier’s only Boeing 737 has required significant maintenance. Air Vanuatu has been trying to minimize the impact of this maintenance issue by leasing aircraft from other airlines.
However, the financial situation has now become so bad that Air Vanuatu has discontinued international flights, and has hired an outside firm to determine the best path forward.
This is a tough situation — I understand the airline can’t bleed money forever, but if Air Vanuatu goes out of business, this will have bigger implications for the country’s economy.
What do you make of Air Vanuatu’s situation?
Vanuatu is a wonderful destination and indeed much more rustic than Fiji. It got recently voted the “happiest nation on earth” (not sure how much to read into those panels). It’s very close to Sydney (3 hrs flight time ish).
My sister and her family just spent two weeks there and had to deal with these plane issues (eventually they flew on Fijian and back tracked to Port Vila). I think Qantas code-shares with...
Vanuatu is a wonderful destination and indeed much more rustic than Fiji. It got recently voted the “happiest nation on earth” (not sure how much to read into those panels). It’s very close to Sydney (3 hrs flight time ish).
My sister and her family just spent two weeks there and had to deal with these plane issues (eventually they flew on Fijian and back tracked to Port Vila). I think Qantas code-shares with air Vanuatu but I don’t think they’ve supported customers by putting their own planes on the route.
Hi Ben, didn't CBS do a series of "Survivor" in Vanuatu in 2004-ish? I'm assuming that'll be how most Americans will know of the country. It seems to be quite an interesting country geography wise, but didn't you plan a trip there in 2018-ish? I'm convinced I remember reading about your plans to fly there around that year.
I visited Vanuatu as part of the 2022 Alaska Airlines deal for 20,000 points OW in Y or 40,000 points in J. Since Alaska offers free stopovers, I booked a one-way ticket from the US to Fiji with a stopover in Port Vila.
My seatmate on the flight to Port Vila was going to Vanuatu for the sole purpose of purchasing Vanuatu citizenship through the very cheap citizenship by investment program.
However, I really wanted...
I visited Vanuatu as part of the 2022 Alaska Airlines deal for 20,000 points OW in Y or 40,000 points in J. Since Alaska offers free stopovers, I booked a one-way ticket from the US to Fiji with a stopover in Port Vila.
My seatmate on the flight to Port Vila was going to Vanuatu for the sole purpose of purchasing Vanuatu citizenship through the very cheap citizenship by investment program.
However, I really wanted to visit the island of Espiritu Santo, instead of the island Port Vila is located. Therefore, I had to fly Air Vanuatu domestically roundtrip from Port Vila to Santo on an ATR 72. It was pleasant, but I didn't realize they only have a single ATR 72 aircraft.
When I was back in Port Vila awaiting my Fiji Airways flight back to Nadi, another flight leaving around the same time, the 737 Air Vanuatu flight to Brisbane, which had only recently resumed flights due to the ending of the COVID-19 lockdown, was delayed a few hours due to technically issues.
I really enjoyed Vanuatu as a destination. It's not for everyone (it was much more rustic than Fiji), but it was quite beautiful. Because it had been closed for COVID for so long and cruise ship traffic hadn't restarted, I had sites like Champagne Beach or the blue holes to myself. Unfortunately, I didn't have time to see the volcano.
Jason, I'm curious about the routing on your ticket to Port Vila - were you allowed to ticket Port Vila as the stopover (connecting it through Fiji) and then backtrack to Fiji as the final destination?
The Alaska Airlines/Fiji Airways routing was JFK-SFO-NAN-VLI (Stopover)-NAN (Destination). I chose to have VLI as the Stopover instead of NAN, because on the return ticket I wanted a different stopover. Alaska Airline's website had no trouble with either routing using the multicity award search tool.
Seems to me the most sensible outcome will be for Vanuatu to end up with a national domestic carrier/island hopper to facilitate domestic connectivity between islands, likely not as a money maker but as a necessary government-funded service, while leaving the matter of international jet service to other carriers. Fiji Airways serves Port Vila and probably makes for the best connecting hub for getting around the South Pacific.
Not sure that the best strategy for a tourist market is to force your customers to reach you via a competing tourist market.
No one's "forcing" anything, Hutch. That's the beauty of it. And as a sidenote, Air Vanuatu has competition on most of its 737 routes, anyway.
But the main point is if a sufficiently robust market exists, someone will fill it. If demand isn't there, those who want to/from Port Vila badly enough will accept connections to make it happen.
A government-funded international operation consisting of a single 737 is sufficiently wasteful to make a...
No one's "forcing" anything, Hutch. That's the beauty of it. And as a sidenote, Air Vanuatu has competition on most of its 737 routes, anyway.
But the main point is if a sufficiently robust market exists, someone will fill it. If demand isn't there, those who want to/from Port Vila badly enough will accept connections to make it happen.
A government-funded international operation consisting of a single 737 is sufficiently wasteful to make a former Alitalia executive blush. There's a point where the price paid to subsidize/attract tourists outstrips the benefit of the cash actually brought in from the tourists.
Over half of tourists to Vanuatu come from Australia. This is a relatively short flight. If you consider Australia and New Zealand, most of their served cities do not have a competitor. This includes Australia's two biggest markets, Sydney and Melbourne.
If those potential customers, are looking for a pacific holiday, some of those customers may just opt for another island that they can access more easily. We know this through the existence of history...
Over half of tourists to Vanuatu come from Australia. This is a relatively short flight. If you consider Australia and New Zealand, most of their served cities do not have a competitor. This includes Australia's two biggest markets, Sydney and Melbourne.
If those potential customers, are looking for a pacific holiday, some of those customers may just opt for another island that they can access more easily. We know this through the existence of history of non-stop flights.
There comes a point, where small isolated countries, dependent on tourists for their economy, imports and easy access to larger economies (healthcare, education), may need to accept that access is more important, than the relative small cost of an airline or subsidising another carrier where required.
Government probably will bail them out after screwing their creditors.