Economist highlights policy failures in Air Vanuatu crisis

July 13, 2024 9:57 pm | Posted in Business News | Share now TwitterFacebook

By Doddy Morris.

Norbert Sumsum Tauwal, a Ni-Vanuatu economist, has voiced his concerns regarding the internal airline issues that have plunged Air Vanuatu into a financial crisis.

Speaking to the Vanuatu Daily Post, Sumsum said the management problems such as mismanagement and misuse could be resolved swiftly by the Board of Directors, shareholders, or the government. However, he believes the core issue lies in Vanuatu’s non-profitable purchasing power in the international airline industry.

Sumsum said the severe market deficit and decline faced by the Vanuatu international airline sector, attributing it to the current monetary programs implemented without the necessary solid institutional infrastructure for competing globally.

“How can we expect to achieve sufficient turnover in an industry facing severe market deficits and decline?” he questioned.

According to Sumsum, Air Vanuatu International is struggling to generate enough revenue to sustain its daily operations and contribute effectively to the country’s economic growth. Despite substantial financial injections from the government and institutions like the Vanuatu National Provident Fund (VNPF) and BRED Bank, the airline’s situation remains dire.

These funds, he explained, have been used primarily to cover administrative costs rather than addressing the root causes of the deficit and decline, which amount to billions of vatu.

Sumsum dismissed the idea of handing over Air Vanuatu to a foreign liquidator as a “mission impossible”. He argued that the real problems stem from the government’s lack of relevant policies for a globally competitive market, rather than the airline’s management issues.

“The rules of the game in the global competitive market economy apply to any product or service worldwide,” he said.

He cited the competitive pressure from Solomon Airlines and Fiji Airways, which offer cheaper services, as a significant factor in Air Vanuatu’s struggles. Travelers often prefer these airlines due to their cost-effectiveness, especially on routes involving transit through Australia and Nadi in Fiji.

Sumsum also criticised the merger of the international and domestic operations of Air Vanuatu, which has exacerbated the financial problems. The high operational costs of the domestic airline have compounded the deficits of the international operations, creating a financial burden too heavy to bear.

Despite the grim outlook, Sumsum believes that Air Vanuatu International has great economic potential. This potential, he said, hinges on the government’s policies, the Board of Directors, shareholders, and the marketing department.

“The game is over for now, but we will wait and see with great interest how a foreign liquidator company might rescue our national flag carrier from the depths,” he said.