I’m not a Fluent expert. The one time I did a VOF model, after Initialization all the cells are filled with Phase 1. I had to Patch the cells that I wanted to start with Phase 2 before starting the simulation. I don’t see you doing a Patch operation. For example, if the tank is half filled with water, then you would patch water into the bottom half of the cells, leaving air in the top half of the tank.

Also, it seems like you have selected to top face of the cube as both a wall and an outlet, which might be a mistake.