State-owned Air Vanuatu scrapped international flights Thursday as the Pacific island's government considered launching an insolvency procedure.
Air Vanuatu is one of the few airlines servicing the South Pacific archipelago with international flights, and the company's demise could hit foreign tourism earnings.
Tourism is a key driver of Vanuatu's small economy, according to the Australia-Pacific Islands Business Council, accounting for around one-third of the nation's economy.
"The Vanuatu Government is now considering placing Air Vanuatu, the national carrier of Vanuatu, into voluntary administration," the airline said in a statement.
Accountants from Ernst & Young had landed in the capital Port Vila earlier in the day to review options along with the airline and government officials, it said.
The carrier said it had cancelled or placed under review all future international flights servicing Australia, New Zealand, Fiji, Papua New Guinea, New Caledonia and Solomon Islands.
The airline said it had been operating in a "challenging environment".
Two of its aircraft, a Boeing 737 and an Airbus A320, are grounded and require engineering work at a time of limited international supply of spare parts, the airline said in an online update.
Vanuatu's tourism office said it was in contact with the airline and the government.
"We are conscious of the impact this situation has on travellers, ticket holders and the industry and on behalf of the Vanuatu tourism industry extend our apologies to anyone affected," it said in a statement.
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