AIR VANUATU LOSES $2.6 MILLION IN 2004

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By Marc Neil-Jones

PORT VILA, Vanuatu (Vanuatu Daily Post, Jan. 5) - Air Vanuatu has lost Vt280 million (US$2.6 million) in 2004 but company officials say they remain hopeful of a turnaround this year.

Problems have included one aircraft sitting idle for seven months in a political tug of war while another has not been filling enough seats in a price war with new competitor Virgin Pacific Blue.

"Yes, we have had a difficult year but we budgeted to make a loss because of acquisitions of the ATR42 and the second Boeing," said Managing Director Jean Paul Virelala. "Because of the delays with Vanair the ATR cost us a lot of money sitting on the tarmac not flying but now it is being used for Tanna, Santo and Noumea it is not losing money. If we can increase seat capacity it will be profitable."

The ATR is reportedly costing Air Vanuatu more than Vt20 million (US$189,215) a month in lease payments and that cost is now being carried by Vanair as a subsidiary of Air Vanuatu following the merger of the domestic and international airlines.

As a result of the losses Air Vanuatu are not continuing with the second 737 aircraft after the end of January when the loan contract expires.

Virelala said that during the low season there will be one less flight a week to and from Auckland, Sydney and Brisbane and it will be reviewed again during the high season.

Alfred Carlot, Political advisor to the minister said board members from both airline companies are to be combined into a single board of about 24 members.

"There are two airlines under one board and the minister is looking at around 24 board members, 12 for each airline" he said.

He confirmed that currently board members are paid Vt50,000 (US$ 473.037) a month which means that the cost to the airline would be Vt1.25 million (US$11,825.9) a month or Vt15 million (US$141,911 ) a year unless allowances are reduced.

The Daily Post has scoured the Internet examining the number of board members on airlines around the world and we did not find any with more than 10 members. Qantas only has 8 members on its board with a huge fleet of aircraft.

The news of fewer flights through Air Vanuatu in 2005 after the cancellation of the second plane will be a big disappointment to many investors building bungalow resorts and hotels.

The Grand Hotel is now likely to open in March or April with 75 rooms coming on the market and Iririki Island Resort are building an extra 70 units by the end of the year. In addition ,Poppy's is building an additional 14 rooms, there are plans for a large resort at Erakor and Breakas are looking at expanding at Pango. Blue Water Resort has opened and is expanding, The Wild Pig has only recently opened as a backpackers resort.

There are tentative plans with VIPA for a new backpacker hotel for up to 112 people at the old Marina Motel, a new 15 bungalow eco resort on Moso, a luxury backpackers resort with 60 rooms at Valesdir Epi, the reopening of Tanna Beach resort, a new 28 room hotel near the museum and chiefs nakamal, a new 27 room budget hotel in Vila and a small bungalow resort at Mele. A backpackers hotel is under construction near Lelepa landing, Kakula luxury beach resort is under construction and there are plans for a backpacker eco resort using luxury tents in the bush on the mainland opposite Kakula island. Santo is attracting interest from hotel developers.

Brian Death of the VHRA expressed confidence that with proper marketing tourist numbers will continue to rise.

"We have had an 18 percent increase in tourists arriving by air last year. An additional 6,000 came in between July and December. Virgin is looking at their schedules here which should improve their load factors."

He refuted suggestions that the resorts were turning away people and that it had adversely affected load factors on Air Vanuatu.

"Over Christmas is always the peak time of the year and that is the only time resorts have been full. The number of rooms is significantly increasing over the next 12 months and it will not be a problem."

January 6, 2005

Vanuatu Daily Post: http://www.vanuatudaily.com

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