NZ Gov’t Tempers Regional Route Subsidy Talk

By Andrew Curran.

The New Zealand Government says it has no plans to subsidise any domestic routes despite Air New Zealand’s new CEO, Nikhil Ravishankar, raising the subject in a recent interview.

Finance Minister Nicola Willis told Radio New Zealand that the government, which owns a 51% shareholding in Air New Zealand, wanted the airline to focus on improving its commercial performance.

As previously reported in Aero South Pacific, Ravishankar said “situational subsidies” may be needed if Air New Zealand was to keep operating “sub-economic (domestic) routes.”

The CEO said that in his opinion, there was a need for some routes to be subsidised and that it was “an emerging area I am starting to think about a lot.”

However, Ravishankar hedged his bets on who would pay any subsidies. He said he didn’t have a definitive answer on that. But Ravishankar said between the government’s shareholding and other privately held shareholdings, 81% of the airline was owned by New Zealanders.

 

“We (New Zealand citizens) are, to an extent, (already) subsidising the sub-economic routes, but they are critical routes connecting New Zealanders to each other and they drive GDP growth. So, we do need to think about how we keep these routes going.”

 

At the time, Ravishankar said he would be talking to the government about it. This week, Willis said that hadn’t yet happened.

 

“I have not had any approaches from Air New Zealand on that subject,” Willis said. “I think it was more the chief executive musing out loud."

 

 

"In the first instance we would like to see Air NZ focused on its own commercial performance," she added.

 

Speaking to another media outlet, Prime Minister Christopher Luxon, himself a former Air New Zealand CEO, said “not really,” when asked if he supported subsidising the airline.

“With respect to subsidies, frankly that's dollars that we are not spending on hospitals or schools,” he said. “And so, it's a pretty simple choice for me.”

Air New Zealand flies to 20 airports throughout New Zealand. Its three largest hubs, Auckland (AKL), Wellington (WLG), and Christchurch (CHC) are connected to each other with high-frequency services using a mix of jet and propellor aircraft.

From these three airports, mostly propeller aircraft fan out into the regions. Some of these routes are relatively high-frequency and profitable. Others are less so, but they serve an important role in keeping the communities connected. Ravishankar acknowledged this.

The new CEO, now around two weeks into the job, was back on the local media circuit in recent days, clarifying his previous comments. Ravishankar said he planned to talk to the government and other aviation groups about regional air routes, adding that subsidies weren’t the only solution.

“Our relationship with the regions isn't transactional,” he said. “We will continue to work very hard to keep those communities connected.”

“That said, there's work to be done around how to make that sustainable into the future. Subsidies is one way, but not the only way, and there's many ways we can look at making those routes sustainable. And the point I'd like to make is that that conversation needs to continue.”

Photo: AI-Generated.