Air Vanuatu Loan Repayments to Resume

 By Andrew Curran.

The Vanuatu Government will resume repaying loans taken out by Air Vanuatu last decade. As first reported by Port Vila’s Daily Post outlet, the government will make a VUV250 million (USD2 million) repayment within days after signing a fresh loan guarantee agreement late last week.

Air Vanuatu Operations Limited (AVOL), trading as Air Vanuatu, borrowed VUV990 million (USD8.1 million) in two tranches in 2013 and 2019. The loans, which were guaranteed by the government, carried an annual interest rate of 6.75% plus a penalty rate of 2%.

The state-owned airline borrowed the money from a state-owned pension fund. Repayments remained on track until 2020, when Covid-19 derailed the airline’s finances. As of May 2024, when the Vanuatu Government called in the liquidators and put the airline up for sale, the debt had grown to VUV1,120,982,827 (USD9.2 million).

As part of Air Vanuatu’s liquidation, the government undertook to repay the loans, plus interest. The lender, the National Provident Fund, was keen to recoup Air Vanuatu’s debt. Pension contributions are compulsory in Vanuatu, where the average wage is around VUV100,000 (USD820) per month and USD9.2 million is a lot of money to lose.

Ultimately, Air Vanuatu, which was down to a single ATR and a couple of Twin Otters, was sold to a Ministry of Foreign Affairs shelf company called AV3 Ltd.

National Provident Fund General Manager Paul Kaunin held recent repayment negotiations with Finance Minister Johnny Koanapo. The negotiations were described as “extensive.”

“It has been agreed that the government will disburse the first instalment of VUV250,000,000 to the National Provident Fund in the week following the signing of this agreement,” an October 24, 2025, media statement from the pension fund reads.

“The government will also fulfil its obligation to pay the remaining outstanding amount of VUV870,982,827 as stipulated in the forthcoming facility agreement, which will be executed by both parties within 90 days of signing this guarantee agreement.”

Photo: AI-Generated.