AIR VANUATU: THROWING GOOD MONEY AFTER BAD?

Editorial

The Independent

PORT VILA, Vanuatu (Sept. 14) – Vanuatu’s national airline keeps trying to persuade us it is in excellent financial shape.

How can it be when it is having to borrow money?

We firstly learned from Daily Post, a fortnight ago, that Air Vanuatu was about to announce a dramatic turn-around. They would break even in 2005, after the company audit, said that paper then. They did all this in spite of Virgin Air providing new competition.

Air Vanuatu's CEO "blasted" The Independent for our alleged inaccuracies in saying the airline was in a financial tailspin.

By last weekend, when The Indy gave some more accurate indication of the airline's financial vortex, the Provident Fund declined to comment (rightly so, too) in the Daily Post on any Air Vanuatu loan.

And in Wednesday's Daily Post, they repeated the government bailing out Air Vanuatu with a VT 150 million [US$1.4 million] loan. Is the government flush with funds and can bail out the airline to this extent and hint at more money being made available? Why?

If the VNPF won't give it a loan is there any sort of approved plan for airline viability. Unlike the government, the VNPF are the trustees of all employees' retirement monies and know what sort of security is needed for a loan.

By Thursday the Post ingenuously asked the airline CEO whether the airline needed a large loan (when they had just reported one was granted – do they now mean another one?).

Now a delicate bit. The CEO's off to China to look at an MA60 aircraft when China's "Twin Otter" carries only one person less. We are assured by CEO Kerr that the ATR makes us money and so it is being repaired. We are assured by CEO Kerr that the existing Twin Otters are safe and we've spent a lot of money doing them up. Great. So why do we need to go to China to look at look-alikes?

What's going on here?

Ah, we can get soft loans from China, we learn. And the "Chinese government came back and they are now looking at financing Air Vanuatu into taking two of these aircraft [the Y12 Chinese designed "Twin Otter"] on a concessional loan with a five-year grace period which are extremely good terms," says Kerr.

Why is the airline going to borrow even more money?

It appears we are NOT going to get the truth from the airline or the government. The mis-management is in one or other place.

You do not sell off the major assets of the company, and pilots assure us the real Twin Otter is the workhorse of the domestic market, so necessary at peak travel periods like school and Christmas holidays and provincial games times. Why replace the existing Twin Otters with new ones from China? Are the existing ones too old, even now they have been overhauled? Is there a financial plan?

And then look at the business of the Boeing 737-800. Is it possible it will be here in March 2008 as the CEO says? The Independent is told of another larger airline having ordered earlier and not having a delivery date that early.

What we the taxpayers of the republic want is the truth from the airline and the truth from government. Pouring our money into an airline with its wings already clipped is a nonsense. And it does neither the government nor management of the airline any credit to try to pull the plane out of the tailspin if there's no hope.

In order to try to find the truth of Air Vanuatu's finances we went to the Vanuatu Financial Services Commission where the company is obliged to lodge its annual accounts. The last report filed is for 2003, which makes the company in default of its statutory obligations.

We think the public is entitled to be told the truth about Air Vanuatu. It's their good money which is being thrown after bad.

September 15, 2006

Port Vila Presse: http://www.news.vu/en/

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