The broken airline that’s still drawing buyers

Air Vanuatu might justifiably be described as a hard sell. The collapsed airline’s accounts are years out of date, half the fleet is in disrepair, there aren’t enough funds to repay creditors and that’s just the start of it. But despite all those drawbacks, there’s still buyer interest. The national carrier of Vanuatu, a South Pacific nation that’s home to little more than 300,000 people — about the same as the US city of Cincinnati — has become an unlikely investment target since liquidators at Ernst & Young took over in May. Several parties have submitted offers, according to Ernst & Young, while Australia, which has a bilateral security agreement with Vanuatu, has said it’s monitoring the situation. The appeal of a failed state asset like debt-ridden Air Vanuatu, which finally buckled after Covid and cyclones decimated the country’s tourism industry, is a telling reflection of geopolitical tensions in the Pacific, where countries including China and the US tussle for leverage. Whoever rescues Air Vanuatu would expect access to — and influence over — the Vanuatu government, according to Tess Newton Cain, a Brisbane-based adjunct associate professor at Griffith Asia Institute. “That’s all part and parcel of international diplomacy,” she said. “Airlines are critical infrastructure.” Amid escalating tensions in Asia, small Pacific nations have gained outsized clout. China has become one of their biggest lenders, part of an effort to build a network of developing countries to take its side in global forums such as the United Nations. Export-Import Bank of China accounted for 30% of Vanuatu’s public debt in 2022, according to the International Monetary Fund. Pushing back, Australia has sought closer ties with Vanuatu and other regional neighbors.<br/>