The Government will provide up to $30 million in loans for struggling regional airlines as it intervenes with a “one-off” move to prevent more air routes from being cut.
The money will come from the coalition’s Regional Infrastructure Fund and was expected to be a “one-off” measure to “stabilise the sector” in the short-to-medium term.
Regional Development Minister Shane Jones said regions faced further cuts to flights, including the total withdrawal of services, without aid from the government.
Carriers including Air Chathams and Sounds Air had been calling for a loan scheme for months amid a period of skyrocketing operating costs.
“Without intervention, our regional airlines face further service cuts or a complete withdrawal from routes, as we’ve seen in some regions around the country,” Jones said.
Smaller carriers warn they may have to sell aircraft and exit more routes. (Source: 1News)
“Once fleet capacity is lost, recovery is difficult and costly. We’re acting now because a combination of factors, including the ongoing after-effects of the pandemic on air services, are placing exceptional pressures on the sector at present.”
He added: “Small regional carriers are under pressure from rising costs, limited access to capital, and ongoing post-Covid disruptions. Without this support, some communities risk losing vital air links and potential regional development.”
But the Government support comes after carriers have already had to make tough calls.
In July, regional airline Sounds Air announced it would sell five aircraft and cut two routes from later this month, blaming rising costs and a “deadlock” over provincial air services.
Reacting to the announcement, NZ Airports chief executive Billie Moore said it was important to note that the move came after some routes were already lost.
“The challenge now is to stabilise the system, prevent further losses where possible, and put regional air connectivity back on a path to growth,” he said.
“In many cases it is now more attractive for operators to sell their aircraft into the international market than to continue running services in New Zealand. Despite this, regional airlines want to keep flying and serving their communities.”
Moore noted that regional air services have been sustained for decades without government support – “an unusual achievement compared with other countries, where subsidies are standard for regional and remote communities.”
“But the long tail of Covid, rising operating and maintenance costs, and the less favourable finance terms available to smaller airlines have changed the equation.”
‘Not a bailout’ – Meager on ‘modest’ support
Associate Transport Minister James Meager said the support “is not a bailout” with funding coming in the form of concessionary loans.
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“The aim is to stabilise the sector and support regional routes in the short to medium term. This is not intended to meet all the airlines’ capital needs but to provide targeted relief for such things as aircraft leasing, maintenance and debt refinancing.”
Jones said: “This is a one-off, modest but meaningful intervention that will help prevent further service loss and protect regional connectivity.”
Cabinet has also approved funding for digital upgrades that integrate regional transport bookings of small regional carriers with the platforms of major carriers.
Known as “interlining”, the upgrades could allow passengers to book a single itinerary and flights on different airlines, including the major carriers, according to the Government.
“Streamlining bookings and baggage-handling between the smaller carriers and the bigger players in the aviation sector will make it much easier for the travelling public to plan and book their preferred routes in one go.”
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