The funding will take the form of concessionary loans to provide short-term relief.
Photo: 123RF
Small passenger airlines are set to receive up to $30 million in loans from the government’s Regional Infrastructure Fund to help with rising costs.
The funding will take the form of concessionary loans to provide short-term relief.
Regional Development Minister Shane Jones said communities were at risk of losing vital air links without intervention – and once fleet capacity was lost, recovery would be difficult and costly.
He said the government was committed to ensuring all regions, not just the urban centres, remained connected and included in the national economy.
“Reliable air services are critical for the economic and social wellbeing of regional New Zealand. They enable access to healthcare, education, business, and whānau, particularly in areas where other transport options are limited,” he said.
“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.”
Appearing on Morning Report, Jones acknowledged it was an unusual step, but said it was necessary to retain regional connections.
He said the government had taken its lead from Australia, deciding the country could not afford to lose aviation connectivity.
“If we do nothing and these airlines wither on the vine, what does it say about us and our attempt to retain regional bouyancy, on the West Coast and such places?”
He said it would be up to the airlines and officials to determine the details of each loan.
Associate Transport Minister James Meager said the aim was 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.”
Cabinet had also approved funding for what the government called “game-changing development” for small regional carriers – digital upgrades that integrated regional transport bookings with the platforms of major carriers.
Shane Jones.
Photo: RNZ / Mark Papalii
Known as “interlining”, the upgrades would enable passengers to book a single itinerary and flights on different airlines, including the major carriers.
The loans would be administered through the Kānoa Regional Economic Development & Investment Unit.
Airlines called it an “unprecedented step”, blaming the pandemic’s long tail for struggles.
New Zealand Airports Association chief executive Billie Moore welcomed the funding, saying they had been working with regional airlines on the issue for about a year.
“This is a huge step for regional aviation – a really unprecedented step for the government to take, but one that is the right thing to do at this point,.
“Covid hasn’t stopped for these airlines – they’re dealing with supply chain issues and cost increases that have just simply continued since the pandemic ended.”
She explained the European Union, United Kingdom and the United States all subsidised regional routes, while in New Zealand, regional airline operators had been surviving until now on the smell of an oily rag.
Moore said she hoped this step would put them in a position for growth.
“How do we grow? How do we improve this system over time?” she said. “Back in the ’90s, even the ’70s, our connectivity was greater than it is now in some parts of the country.”
Interlining would enable greater cooperation between airlines, meaning greater connectivity.
“Being able to book a ticket from, say, Westport through to London, is one possibility of interline services” – although she stressed that route was only an example, and not a sure bet.
The Aviation Industry Association’s chief executive Simon Wallace called it a critical lifeline for small passenger airlines.
“We’ve lost several regional routes in the last year in the face of unsustainable cost structures,” he said.
“So, we are very pleased that the government has listened and has responded.”
But he said the escalation of fees and levies regional carriers were facing made regional routes “increasingly less viable”.
Digital upgrades to integrate regional transport booking with the platforms of major providers would remove barriers to air travel from smaller centres by streamlining bookings and baggage-handling.
“For example, this should make it possible for someone to fly from Whakatane or the Kāpiti Coast to London on a single boarding pass and check their luggage all the way to the final destination.”
‘For the greater national good’
Air Chathams said the package will help the airline keep its Auckland-Whakatane and Auckland-Kapiti routes going.
Chief executive Duane Emeny said the airline business is by its nature, a higher-risk business for lenders because things can go wrong quickly, citing ground equipement colliding with one of its planes recently, putting it out of action temporarily.
“All of that risk ultimately transfers to if people are going to loan you money to do stuff, its going to be a whole lot more expensive.”
He said it was important to realise that regional aviation was part of a wider ecosystem and regional airports, for example, could not survive if planes no longer landed there.
Emeny said the package was a step in the right direction and what was more important, is the signal government was sending.
“What effectively its saying, is that the government actually appreciates that what we are doing is for the greater national good, and they’re really putting a line in the sand and supporting that.”
Sounds Air said the support would help a little, but regulatory fees needed to drop to really lower running costs.
Sounds Air managing director Andrew Crawford.
Photo: Sounds Air
Managing director Andrew Crawford told Morning Report they’d had to cut key routes, but it wasn’t for lack of demand.
“That is not the problem, demand has never been better for our business,” he said. “The real problem is costs, and the costs are through the roof, and they continue to do so.”
He said the company’s CAA costs – that is, regulatory fees – had jumped from $12,947 for June, to nearly $34,924 across July.
That had been caused by “a 145 percent increase imposed by the government”, Crawford said.
“There’s a fear that it’s too little, too late,” he said.
Sounds Air had already cut routes to Taupō and Westport, as well as connections from Christchurch to Blenheim and Wānaka, and was selling six airplanes. Those routes wouldn’t return, he said, and the airline had already lost those pilots.
“We’ve been lobbying the government for six years, and our business has been ripped to pieces.”
He said pleas to the government two years ago, through then-Transport Minister Simeon Brown, for this kind of assistance. They were told to apply to the Regional Infrastructure Fund, and were rejected.
These loans would hopefully allow more regional routes to stay running.
“The idea that mum and dad and the kids are gonna fly from Blenheim to Christchurch for the weekend for a holiday – that is not what this is about. This is about regional connectivity for healthcare, education and business.”
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