Air Vanuatu has filed for bankruptcy protection, just a day after it cancelled all international flights, leaving thousands of travellers stranded.

Air Vanuatu lodged for bankruptcy protection on Friday, a day following the cancellation of all international flights by the South Pacific state-owned carrier, leaving thousands of travellers stranded.

The airline cancelled over 20 flights to and from Australian cities Sydney and Brisbane, as well as the New Zealand city Auckland, for the remainder of the week, attributing the decision to "extended maintenance requirements" for their aircraft.

Ernst & Young Australia's Morgan Kelly, Justin Walsh, and Andrew Hanson were appointed liquidators in a manner equivalent to a U.S. Chapter 11 bankruptcy, as stated by the firm. The liquidators announced that safety and maintenance checks would precede the resumption of regular operations.

Kelly affirmed that the current management team of the airline would continue in their roles.

"Air Vanuatu is vital to the people of the Republic of Vanuatu and is a strategically significant enterprise for the nation," stated Kelly. "Our team is collaborating closely with management to ensure uninterrupted service to customers and a seamless continuity of operations."

"The airline's prospects are promising, notwithstanding challenges facing the broader industry, and we are committed to securing the future of this strategically crucial national carrier," he added.

Affected travellers would be notified of the disruption and rebooked on flights once operations resumed, as per the statement.

Air Vanuatu operates four aircraft, including one Boeing 737 and three turboprop planes.

Tourism accounts for 40% of Vanuatu's gross domestic product.

The Vanuatu Tourism Office expressed regret to travellers for the inconvenience.

"This situation is evolving, and we will continue to provide updates," the office stated.

Chief Executive of the office, Adela Issachar, mentioned that discussions were ongoing with Virgin Australia and Fiji Airways, current service providers to Vanuatu, regarding the transportation of stranded passengers.

"The revised schedule should be forthcoming soon, and we are eagerly awaiting that," Issachar informed the Australian Broadcasting Corp.

Kelly mentioned that Air Vanuatu had been affected by labour shortages, escalating operational expenses, high interest rates, and a decrease in tourist numbers due to tropical cyclones in recent years.

"We will explore all options. The Vanuatu government has indicated its preference to resume operations promptly. As voluntary liquidators, our task will be to assess all avenues to achieve this and ensure sustainability," Kelly informed reporters.

"So, this could involve some form of sale process or perhaps a partnership arrangement with another airline," he added.

Australian tourist Sally Witchalls stated that she and four friends were checking out of their Port Vila hotel on Wednesday morning when they were informed at reception that their Air Vanuatu flight was cancelled for the day.

She subsequently discovered that her travel insurance did not cover an airline entering voluntary administration, as Air Vanuatu had, or bankruptcy.

"We're left to figure out how to cover the accommodation costs moving forward while we await developments in the Air Vanuatu situation," Witchalls informed ABC.