VANUATU GOVERNMENT REVIEWS STRATEGIC OPTIONS FOR AIR VANUATU

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PORT VILA, Vanuatu (May 27, 1999 - PACNEWS)---Vanuatu Prime Minister Donald Kalpokas said New Zealand consultants have been asked to review future options for the national carrier, Air Vanuatu.

Air Vanuatu suffered significant financial losses from hailstorm damage to its plane in Sydney.

The loss amounts to just under US$ 2.32 million, with just a little over half of this amount covered by insurance.

In response to the tighter financial situation now facing the airline, Air Vanuatu management has developed a restructuring plan to reduce its costs.

The airline's Boeing 737 returns to service early next month and officials are confident it will be able to return to profitability by the second half of next year.

Prime Minister Kalpokas said the disruption to normal scheduled flights, has had wider implications for the country's economy, particularly hotels and other tourism-related businesses.

Because fewer tourists are visiting Vanuatu, hotel revenues have been reduced by about a quarter.

"Without profits, there will not be any new investment in additional tourist accommodation and no new jobs. Other tourism-related businesses, such as tour operators, restaurants and tourist shops, are also likely to be adversely affected."

"The extent of the financial losses created for businesses in Vanuatu by the accident to the Air Vanuatu plane has starkly underlined the country's vulnerability to any serious disruption to its air services," the Prime Minister said.

Kalpokas said the decision to commission this study reflects the Government's determination to do all it can to protect the economy from any repetition of such a large-scale disruption to its international airline services.

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