Air Vanuatu (Operations) Limited (Ltd) entered liquidation on 9 May 2024 and Ernst and Young (EY) were appointed as Liquidators.
09 June marked one month since the liquidation, and Tuesday, 9 July, marked two months. The question is: What is the timeframe and deadline for EY’s deliberations to determine Air Vanuatu’s future?
When contacted, the Minister of Finance and Economic Management, John Salong, shed more light on the process and a potential deadline in August.
“We had been expecting, firstly, the creditors’ meeting, which occurred on 12 June,” he said
“At this meeting, we received the full value of the debt for Air Vanuatu (Operations) Ltd. Over 600 creditors were registered, and this is where the verification of the total liabilities took place.”
Minister Salong said prior to that, the government had made the first payment to the staff after the liquidators took over on 9 May. On payday, which was on the 15th of May, the government paid the salaries of 441 Air Vanuatu staff. Before the second payday on 30 May, 175 staff were made redundant.
“So of course, through the liquidation process we arrived at a deadline which is on the 24th of June, this is for the Close of Business (COB) to those bidding, those with interests in Air Vanuatu, and those who want to pay for the assets,” he explained to the Vanuatu Daily Post.
“From the 24 June up until now, it is a period to assess those bids. Some of the bids are frequent which means they came in to speak for nothing, while some are substantive and we have to check them if they are true, or if they are eligible for bidding, have money, history and experience, as normally required.
“In the meantime, the next step which we are expecting in for the liquidation process is what is called deed of compromise. This means the creditors have to agree on what they have been expecting as their pay, that they will not receive as whole but by a percentage based on the asset value.
“From the creditors’ conference we had established the total value of the debt of Air Vanuatu (Operations) Ltd. Additionally, we assessed the assets, value, and property of the national airline.
“The key question is: what is the debt versus the real value of its assets? If you borrow funds from someone, the value of your bank accounts and property, known as asset value, is crucial.
“When you balance assets against debt, if you realise that you have a debt of VT100 million (US$ 843,043), but your assets are only worth VT30 million (US$252,732), it means that creditors expecting VT100 million (US$ 843,043) will not receive the full amount; they will only get VT30 million (US$252,732). This situation is known as a creditors’ compromise or deed of compromise, which has not yet occurred. This deed of compromise needs to happen.”
The Finance Minister said that once the agreement is registered in court, the process of liquidation will be considered complete. Currently, a new date has been set.
Minister Salong conveyed his desire for creditors to agree to the removal of liquidation and for the court to approve Air Vanuatu (Operations) Ltd trading without liabilities. He said, “I am looking forward to this happening on the 31st of August.”
“This is the timeline we have based on the current situation. It has been challenging to set a specific deadline due to uncertainties as everything had been muddy, but now that we are addressing these issues, we are aiming for 31 August for Air Vanuatu to exit liquidation, pending court approval of the creditors’ compromise.
“Thank you to everyone who are currently working hard, including those at the Civil Aviation Authority of Vanuatu (CAAV), the finance team, the EY team, the Vanuatu Financial Services Commission (VFSC), and the Air Vanuatu team. They are working hard to resume domestic flights, particularly the Twin Otter service, as soon as possible, and to ensure pilots are tested and ready to fly.”
While international flights connecting Australia to Port Vila and Santo have resumed successfully, domestic flights are yet to resume. According to Minister Salong, domestic flights will resume once pilots are certified to fly again. Since the liquidation and grounding of the domestic fleet, the CAAV must provide confirmation for them to fly again.