VANUATU GOVERNMENT OKS AIRLINE MERGER PLAN

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PORT VILA, Vanuatu (June 12, 2001 - Vanuatu Trading Post/PINA Nius Online)---The new government of Edward Natapei has endorsed the merger of the international airline Air Vanuatu and financially troubled domestic airline Vanair - for the time being.

The decision came amidst reports of a drop in tourism numbers and worries about advanced bookings.

Minister for Civil Aviation Jackleen Titek announced that the government has endorsed the current merger process, which went ahead with a legally signed document in the last days of the Barak Sope-led government.

An independent review will be undertaken at the end of the first financial year of the merged operations to see if it is viable to then separate the two operations again. The government has made it clear that it prefers the two airlines to be separate.

But the Vanuatu Trading Post understands that if the government had decided to "de-merge" the airlines they would have needed to find 400 million vatu (US$ 2,776,814).

This would be to pay off what Air Vanuatu anticipates is needed to pay Vanair creditors and set up adequate cash flow.

As the government doesn't have this money, there seemed little point in stopping the merger, which was strongly supported by the private sector.

The problem is that creditors are happy to deal with Air Vanuatu but not directly with Vanair.

Westpac bank has voiced concern over the time it is taking to settle the merger and Air Vanuatu general manager Jean Paul Virelala is also worried saying: "We will do whatever the government wants but we need to know quickly as we are having problems holding off creditors owed money."

Virelala didn't comment on information received by the Vanuatu Trading Post that he would sell one of the Vanair Twin Otters to pay off debts.

Meanwhile, the fall in the value of the Australian dollar has made Vanuatu an expensive holiday destination compared to Queensland, which has increased its marketing and taken business away from the Pacific Islands.

Fiji has also picked up business after strong marketing drives in Australia and New Zealand.

These two factors have resulted in a big reduction in the number of tourists coming to Vanuatu.

Hotels and resorts report a big fall in advanced bookings, group conferences, and convention bookings.

Virelala confirmed that airline bookings are down compared to last year but stated: "This is because we were offering a two fly for the price of one deal which we haven't done this year. Also the problems in Fiji last year helped us."

Pacific Islands News Association (PINA) Website: http://www.pinanius.org 

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