China Destroys Air Vanuatu As Taiwan Backed Nauru Airlines Looks To Buy
The liquidation of Air Vanuatu follows closely on the heels of Australian low-cost carrier Bonza entering voluntary administration.
Bonza owes over $100 million to various stakeholders and is in talks with potential buyers, although it remains unclear what assets are being sold given its limited holdings.
Bonza’s fleet was 49 percent owned by private equity firm 777 Partners and 51 percent by AIP Capital’s management.
Nauru Airlines has joined the race to acquire Air Vanuatu, which collapsed into liquidation last Friday. Nauru Airlines, the flag carrier of Nauru, had previously leased a Boeing 737 to Air Vanuatu, making its interest in the acquisition unsurprising.
Ernst & Young (EY), the liquidators managing the process, says in a creditors’ report, “The company’s financial position is dire, and it clearly cannot fund its own operations”, estimating that Air Vanuatu owes $US73.5 million.
Fiji Airways has also expressed interest in Air Vanuatu, aiming to curb Virgin Australia’s expansion in the region. Both Fiji Airways and Virgin Australia have added extra flights to Vanuatu to accommodate travellers affected by Air Vanuatu’s cancellations. Although, it is understood many travellers have experienced significant difficulty in returning to their home country.
Nauru Airlines, a wholly state-owned enterprise, operates a seven-plane fleet and services destinations including Brisbane, Nadi in Fiji, and Majuro in the Marshall Islands.
It is anticipated the Australian Government may take an interest in the bidding process, as part of its efforts to counter Beijing’s influence in the South Pacific.
Air Vanuatu’s financial troubles have been linked to Vanuatu’s debt from Chinese Belt and Road Initiative infrastructure projects.
Nauru Airlines has a complex financial relationship with Taiwan, having signed a $US25 million loan agreement with Taipei’s Export-Import Bank in 2021 to finance aircraft acquisitions. However, earlier this year, Nauru shifted its diplomatic allegiance from Taiwan to China, casting uncertainty over the airline’s financial arrangements.
Air Vanuatu’s only Boeing 737 is currently in Melbourne after being repossessed, and of its five smaller planes, only two are considered “flight-ready.”
For potential bidders, the attraction is not the airline’s fleet or operations which have virtually no value, but rather the lucrative rights to fly to Vanuatu.
Air Vanuatu’s first creditors’ meeting is scheduled for May 22.
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