Air Vanuatu has entered voluntary liquidation and authorities are unable to say when flights will resume, leaving Australian travellers and ni-Vanuatu people stranded across the two countries.
Ernst & Young confirmed it took control of the airline after the Vanuatu government appointed it as voluntary liquidator of the company.
Air Vanuatu said on Thursday afternoon all international flights until Sunday were cancelled, and flights after that day were "under review".
Ernst & Young said it would conduct safety and maintenance checks before resuming normal operations.
"The liquidators intend to resume normal trading as soon as possible, while considering all opportunities to place the carrier on a stronger footing," Ernst & Young said in a statement.
"Affected travellers will be informed of this disruption and re-booked on flights as soon as operations resume.
"The existing management team will remain in place and will work closely with the liquidators through this process."
Uncertain time frame for return
Vanuatu's Finance Minister John Salong, whose role makes him a shareholder of Air Vanuatu, said no-one knows when the airline will resume its services.
"The first thing they have to do is, one, assure the employees that it's business as usual, so they can take care of the customers that are currently stranded and customers that have been making bookings," he said.
"The second thing is, of course, to look at ensuring that everything is safe, because we're talking about aircraft being in the air and safety has always been paramount for Air Vanuatu.
"The third thing is to deal with the suppliers so that we can have all the necessary processes in place so the business can run as per usual.
"So it may take a couple of weeks."
Morgan Kelly, an Ernst & Young partner in turnaround and restructuring services, said the liquidators were working as quickly as possible so that passengers could get home.
"We have people who are stranded in all kinds of locations at the moment and also people who are stranded in Vanuatu trying to return home to their destinations," he said.
"At the moment we're working with all of our partner airlines, our codeshare airlines.
"And we're also working with other operators and the Vanuatu government agencies to try and come up with a solution as quickly as we can."
Vanuatu Tourism Office chief executive Adela Issachar Aru apologised to travellers affected by the flight cancellations.
She said the office was waiting for updated flight schedules from Air Vanuatu, and that these would be available soon.
'It's so shameful'
Ni-Vanuatu seasonal worker Gordon Kalotiti is stranded in Melbourne with more than 30 other workers, and is waiting to hear when they can return home.
The seasonal workers learnt of Air Vanuatu's flight cancellations at the city's airport yesterday, after a long journey from regional Victoria.
"The weather is not really good … We must sleep around here, waiting for information," Mr Kalotiti said.
They were told to wait, and that they would be put on another flight home.
"The information that we have [is] the same information that we had yesterday. We are still waiting."
Mr Kalotiti said Air Vanuatu had a responsibility to find and pay for accommodation for the seasonal workers while they wait.
"I came to Australia to work, and to take money back home. And it doesn't make sense to me that if we are stranded here, we will pay our own accommodation and food and other stuff.
"What I'm seeing is not fair."
He called on the Vanuatu government to fix the problems affecting Air Vanuatu.
"It's so shameful that we are here," he said.
'It's left people agitated'
Sally Witchalls, from Canberra, was due to fly out of Vanuatu's capital city Port Vila on Wednesday but learnt of the flight cancellations as she checked out of her hotel.
She is still waiting along with four other friends to hear about alternative flights home.
"We're in the dark here. There's very little communication from the airlines, from Air Vanuatu or any other carrier services they're linked with as well."
She tried to book a flight departing later in the week, but it fell through.
"We're waiting and we're hoping and hopefully we'll get some information today."
Her travel insurers have told her she won't be covered in cases where the airline goes into liquidation, and she and her friends are working out how they will pay for some of their additional accommodation.
"It does leave you a little bit worried about what travel insurance is for," she said.
Ms Witchalls said some stranded passengers have looked for alternative routes home, including flying out to Fiji, to fly back into Australia with Fiji Airways.
She said there was anxiety among some stranded passengers waiting to hear when they could fly home.
"There's a lot of families here and a lot of people with differing levels of health and health needs as well," she said.
"It's left a lot of people agitated, concerned about when they're getting out and also looking for their needs going ahead for the next couple of days."
Air Vanuatu, which is owned by the Vanuatu government, has been grappling with issues affecting its services including flight delays and cancellations, and its Boeing 737 has been in maintenance for extended periods.
A spokesperson from Australia's Department of Foreign Affairs and Trade said they were "aware of reports that Air Vanuatu and its codeshare partners have cancelled or re-scheduled all flights over the coming days".
"Australians affected by the travel delays should contact their travel agent or travel insurance company," the spokesperson added.
