A representative of Air Lease Corporation has flown into Vanuatu to discuss the VUV700 million vatu (USD5.9 million dollars) Air Vanuatu (NF, Port Vila) reportedly owes for the lease of its sole B737-800.

A "rapid assessment team" supplied by Australia's Department of Foreign Affairs and Trade (DFAT) has been in the country since mid-January to help overhaul the struggling flag carrier. Their investigations have revealed that Air Vanuatu Operations Limited (AVOL), the state-owned holding company running Air Vanuatu, owes a total of VUV2.7 billion (USD22.9 million), which includes the lease debt. The investigation also turned up VUV1.2 billion (USD10.2 million) in cash held across multiple bank accounts.

YJ-AV8 (msn 42052) has been with Air Vanuatu since 2016 and is the airline's only jet aircraft. The plane operates scheduled passenger flights to Auckland International, Port Vila, Sydney Kingsford Smith, Brisbane International, and Melbourne Tullamarine. The financial details were contained in an initial report which was compiled by the DFAT team and circulated late last week. In 3Q 2022, ch-aviation reported that ALC had threatened to repossess YJ-AV8 unless the debt was settled and gave the airline a three-month deadline.

Following a November 2022 election, Vanuatu's new prime minister, Ishmael Kalsakau, described Air Vanuatu as a "mess." He replaced the board and removed the CEO before asking the Australians to assess the airline.

The initial report notes that Air Vanuatu's new board has agreed to pay 20% of the amount owed to ALC. The language in the report implies the leasing terms favour ALC at the expense of Air Vanuatu. The report notes "more reasonable" terms might be negotiated if AVOL can put together "a business case indicating the projected revenue forecast increasing with a second aircraft". However, in the short term, the report says that the likelihood of the lessor grounding and/or repossessing YJ-AV8 will reduce if the debt is paid.

In addition to detailing issues with the B737-800 lease, the report makes several recommendations regarding management practices at the airline. It recommends against the current practice of several board meetings a week, saying two per month was the more appropriate number. The report says the current meeting schedule consumes too much of the CEO's time and impacts his "ability to focus on the effective operation of the airline with his management team."

The report also flagged the lack of formal reporting structures from the CEO to the board. It called for a formal weekly report to be provided to board members that detail agreed criteria such as cash flow, ticket sales, major problems, and emerging opportunities. Also criticised was the high level of interaction between board members and Air Vanuatu employees. "(The) board engages very closely with the airline staff on a day-to-day basis," the report said, calling the practice inappropriate.

Following the first report, DFAT has offered further assistance to Air Vanuatu's flight operations and engineering teams, as well as the operations and control centre. ch-aviation has contacted Air Lease Corporation regarding the outcome of their discussions with the airline and the DFAT team last week.