Vanuatu tourism hit as Air Vanuatu cancels flights, enters liquidation

Tourists stranded after Air Vanuatu cancels flights to Australia and New Zealand as government puts Pacific Island's national carrier into liquidation

The national carrier of the Pacific Island nation of Vanuatu may be sold to a private operator, liquidator EY said on Friday, as large numbers of tourists remained stranded after Air Vanuatu cancelled flights to Australia and New Zealand.

Vanuatu tourism hit as Air Vanuatu cancels flights, enters liquidation (File Photo by Dean Lewins/AAP Image via AP)

The Vanuatu government, which owns the airline, put the carrier into voluntary liquidation on Thursday, a day after Air Vanuatu cancelled international flights, citing extended maintenance requirements for its aircraft.

"All flights have been grounded with immediate effect," a notice on the carrier's website said on Friday.

A large number of customers have been impacted and partner airlines have also suspended codeshare arrangements between Vanuatu and Australia, EY Strategy and Transactions Partner Morgan Kelly said at a press conference in Sydney on Friday.

EY said it was working with the airline's management to resume normal operations as soon as possible after conducting safety and maintenance checks, but it could not provide a date.

The carrier operates only four planes between the country's islands - which rely heavily on tourism - and to Australia, New Zealand and other South Pacific islands.

EY said its appointment followed a challenging period for the global aviation industry, including labour shortages, inflation affecting input costs and credit costs.

Vanuatu has been particularly affected by disruption of tourism activity due to cyclones.

"We may end up with some kind of sale of the business to a private operator," Kelly said.

EY was assessing how to make the airline's operations sustainable, which could also involve a partnership arrangement with another airline, he added.

The outlook for the airline is positive, despite pressures on the broader industry, and Air Vanuatu is a "strategically vital national carrier", EY said in a statement.

The first meeting of creditors will be scheduled shortly, while the current management team will remain in place, it added.

Australian carrier Qantas Airways said it was supporting its codeshare customers who were booked onto Air Vanuatu flights.