The government of the Pacific island of Vanuatu has taken control of Air Vanuatu (NF, Port Vila) after firing its board of directors in an effort to save the state-owned airline from bankruptcy.

“The situation of the airline is very, very critical, that’s why we took this decision,” Finance Minister Johnny Koanapo, said in an interview with Buzz FM Radio.

He said the country’s Council of Ministers on March 11 had terminated the tenure of the board with immediate effect following a decision last month by the state-owned airline’s shareholder representatives, which included the Prime Minister's office, and the Ministries of Finance, Trade, Public Utilities, and Tourism.

He confirmed that Chief Executive Officer Atu Finau remained in office to manage the airline, but the Ni-Vanuatu government had taken control of the Board and the Finance Ministry had taken over the financial control of the company, keeping close watch over spending.

He said the government intended to restructure and partially privatise the company to reduce its heavy reliance on state coffers, as was the case at present. “We anticipate that there will be very little control or interference from the government (in the airline) in the near future,” he said.

Meanwhile, the Council of Ministers would be asked to approve emergency state funding totalling VUV700 million vatu (USD6.4 million) for Air Vanuatu, which in turn would have to be approved by the country’s parliament at its next sitting in May. Of the amount, VUV400 million (USD3.6 million) was needed to pay the airline’s 200 employees, and the rest to keep creditors at bay. "The company has a lot of outstanding accounts with creditors who have threatened to take action against the company so we have to do everything necessary.” He added: “We will not allow this company to go bankrupt.“ This followed a state guarantee worth VUV592.3 million (USD5.3 million) issued in December 2020 to mitigate the carrier’s years of compounding debt.

Koanapo also confirmed that Air Vanuatu’s Air Operator’s Certificate (AOC) had expired on March 15, 2021. The Ministry of Public Utilities had been tasked to issue assurances to the Director of Civil Aviation that the government would provide continued funding to Air Vanuatu in order to ensure its continued certification. "No-one wants to see the airline become dysfunctional,” he said.

The Minister said the airline’s problems were historical, which, he said included “political interference, negligence, an over-enthusiastic approach by previous management that committed the airline very heavily beyond its financial capacity”. Besides a state-led Commission of Inquiry already underway, there had been "a lot of allegations surfacing”, he added. The commission is probing decisions made by the former board to purchase four A220s (two A220-100s and two A220-300s). The government wants to reduce the order to two aircraft given the airline’s financial situation. The carrier currently has a fleet of three DHC-6-300s, one B737-800, one ATR72-600, and one BN-2. Air Vanuatu has been restricted to operating domestic and occasional repatriation flights because of COVID-19. Vanuatu's borders have been closed to international travel since the start of the pandemic in March 2020.

Koanapo said details of the restructuring would emerge once the shareholders had taken control of the situation. The government was confident the direction it was taking towards partial privatisation would result in a strong domestic airline with one or two regional routes servicing Fiji, New Caledonia, Australia, and New Zealand.

The latest developments at Air Vanuatu are reminiscent of 2017 when the government also sacked the entire board of the airline, which at the time had been undergoing a restructuring of its operations and finances since early 2016.