Air Vanuatu liquidation exposes insurance coverage gaps

Thousands of travellers left stranded, facing financial losses

Air Vanuatu liquidation exposes insurance coverage gaps


By Roxanne Libatique

Air Vanuatu’s unexpected decision to enter voluntary liquidation has left thousands of travellers stranded and facing significant financial losses due to widespread flight cancellations.

The situation follows closely on the heels of budget airline Bonza’s recent insolvency, which affected 60,000 customers, according to 9News.

According to ABC’s report, Ernst & Young, the appointed liquidators, said affected passengers will be rebooked once operations resume. However, the timeline for when flights will recommence remains unclear.

A spokesperson from the Department of Foreign Affairs and Trade (DFAT) has advised affected Australians to reach out to their travel agents or travel insurance providers. Consumer experts, however, warn that only a few travel insurance policies cover such insolvency events.

Australian travel insurers that cover airline insolvency

Natalie Ball, director of Compare Travel Insurance, indicated that travellers impacted by Air Vanuatu’s liquidation might be able to claim expenses through their travel insurance.

“In the event that an airline has entered voluntary administration, only a handful of travel insurers provide reimbursement for lost trip costs. This benefit usually only applies to comprehensive policies and claims would be assessed on an individual basis,” she said.

She highlighted that not all travel insurers provide coverage for insolvency or financial collapse, stressing that customers need an active policy before the event to be eligible for claims.

Compare Travel Insurance highlighted insurers that cover airline insolvency:

  • Cover-More offers up to $10,000 for rearrangement or cancellation due to insolvency of a travel services provider (applicable to comprehensive policies only);
  • Go Insurance providers up to $1,500 for trip cancellation or amendment due to financial default of a travel service provider (for Go Plus policies only);
  • Travel Insuranz covers up to $5,000 for the insolvency of a booked travel carrier (applicable to Deluxe policies only); and
  • World2Cover assists up to $3,000 per adult if the travel services provider, excluding agents and operators, suffers financial default.

How to mitigate travel insolvency risks

Ball advised travellers to thoroughly research travel insurance providers to avoid potential risks.

“Make sure you know what you’re covered for and ensure you’re up to date on what you’re entitled to as a consumer. Always choose reputable travel providers and consider booking your trip through a travel agent – they may be able to issue you with a refund under these circumstances,” she said.

Using a credit card for travel bookings might also offer additional protection, according to Ball.

“If you aren’t covered by insurance, you could be entitled to a ‘chargeback’ through your credit card company if you pay for a service and don’t end up receiving the product or service. Keep in mind that you would have to have paid for most of your trip via your credit card to be eligible,” she said.

She further emphasised that travel insurance generally excludes coverage for the insolvency of travel agents but can be crucial for airline insolvency.

“Travel insurance generally excludes coverage for the collapse of a travel agent. However, in the case of airline insolvency, travel insurance can be a lifesaver. We highly recommend securing travel insurance before any trip as a preventive measure,” she said.

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