Shane Jones, James Meager say $22m loan package will help struggling regional airlines

Three more regional airlines will get government loans totalling almost $22 million.

Air Chathams will receive $17.2m to refinance debt.

Blenheim-based Sounds Air will get $4.5m to upgrade its fleet and refinance debt.

And Island Air, connecting Tauranga and Mōtītī Island, will get $252,000 for fleet maintenance.

Minister for Regional Development Shane Jones and Associate Minister of Transport James Meager announced the funding this morning.

“Regional connectivity is vital to New Zealand’s economic and social wellbeing, but the industry is under pressure, with some crucial routes at risk,” Meager said.

“That is why we have taken action to help stabilise the sector in the short to medium term.”

He said the airlines involved provided essential services and were often the most efficient way for locals to access specialist health care, connect with family, and do business.

“In places like the Chatham Islands, regional airlines are the sole connector for residents to the mainland,” he added.

“Losing those routes would risk people being cut off from the rest of the country and disruption to the delivery of essential services.”

Jones said the loans would help the airlines continue operating routes important for regional economies and communities.

The regional airline funding package was created late last year, before the current Middle East conflict.

“The impact on fuel supply and pricing has had ramifications across the world, including in the aviation sector,” Jones said.

“The Government acknowledges it is now an even more challenging commercial environment for regional airlines, and there is uncertainty about the future.”

Jones said the Government had listened to concerns from regional operators.

He said the Government had also sought advice from officials about temporarily adjusting loan conditions to help regional airlines “meet their obligations in adverse conditions”.

The NZ Airports Association said the new loan announcements were a milestone in long-term efforts to stabilise regional aviation.

“This is an essential and worthwhile investment in businesses that serve as the heartbeat of New Zealand’s regional economies,” NZ Airports chief executive Billie Moore said.

“For Sounds Air and Air Chathams, these loans provide greater confidence to maintain fleets and shore up operations,” she added.

“While we celebrate this progress, the operating environment has shifted dramatically since we first proposed this scheme.”

The Aviation Industry Association (AIANZ) last week said avgas and jet fuel prices were putting some airlines in a near-impossible position, with regional connectivity at risk.

“These prices are becoming almost unsustainable,” AIANZ chief executive Simon Wallace said.

“They’ve got to the point now where they can’t pass all the costs on to customers.”

Wallace said subsidies should also be considered.

Meager last week told the Herald he acknowledged the fuel crisis had created more pressure for regional airlines.

“And I believe it is worth considering what flexibility there is under the existing fund conditions,” he added.

In late February, Golden Bay Air was announced as the recipient of a $1.1m loan.

John Weekes is a business journalist covering aviation. He previously covered consumer affairs, crime, politics and courts.