Air NZ hopeful subsidies will continue
Since the border closed at the start of the pandemic the Government has spent more than $700 million subsidising freight flights in and out of the country to ensure international trade links stay open.
Airlines say it is critical these subsidies continue after New Zealand’s border opens but, for now, no more funding is available beyond March.
Air New Zealand says it will take time for passenger volumes to stabilise and is confident subsidies will continue.
Transport Minister Michael Wood says the Cabinet will decide if funding is extended, and he expects to make announcements in the next few weeks.
He says it is too early to tell when international aviation will return to a commercially viable position, but he is confident many routes will start to become viable on their own this year.
In March 2020, the Government created a $600m Covid-19 support package for the aviation sector.
Of this, $372m went towards an International Air Freight Capacity scheme to ensure critical supplies continued to flow to and from New Zealand.
That scheme ended in April last year and was replaced with the Maintaining International
Air Connectivity scheme, which is due to end on March 31.
Ministry of Transport Covid19 policy and delivery manager Jessica Ranger says the scheme had a budget of $170m for May 1 to October 31 last year.
When the scheme was extended to March 31, the Government pumped in another $195m.
An additional $25m was allocated to ensure connectivity is maintained if there are pauses or suspensions with countries New Zealand has quarantinefree travel with, she says.
Ranger says that since May 2020, more than 11,900 flights carrying more than 225,000 tonnes of airfreight worth about $18 billion have been subsidised by the Government.
The schemes have been used by 12 different airlines and currently support nine airlines flying to 23 international destinations: Air New Zealand, China Southern, China Airlines, Cathay Pacific, Emirates, Malaysia Airlines, Air Tahiti Nui, Korean Air and Aircalin.
Board of Airline Representatives executive director Justin Tighe-Umbers says ongoing support from the scheme is critical as long as arrivals are required to isolate for seven days.
‘‘Planes have been flying with 80 per cent seats empty on average across the industry under MIQ, and airlines tell me they don’t expect a significant uplift under the self-isolation rules,’’ Tighe-Umbers says.
Once New Zealand moves to quarantine-free entry for all vaccinated arrivals, there will be no need for air freight support to continue as airlines will be able to fill their planes with passengers, he says.
‘‘Airlines flying to New Zealand want to be able to run flights that make returns so that they don’t need extended government support.’’
Since Covid19 hit, New Zealand has lost more than 70 per cent of airline belly hold space, he says.
Without quarantinefree entry more capacity will be lost, he says.
Air New Zealand cargo general manager
Anna
Palairet says the Government scheme has been supportive for airlines and kept supply chains open for importers and exporters.
‘‘We could not be doing what we do currently without that support,’’ Palairet says. ‘‘Cargo in its own right does not accommodate the cost of running an aircraft.’’
She says there is going to be a ‘‘transition phase’’ when the border reopens before passenger volumes stabilise, and the airline hopes the Government keeps some form of air freight subsidies in place. ‘‘There will need to be some support that covers off that intervening period.’’ She says the airline is confident the scheme will continue.
When the border opens some markets will have higher and more stable passenger movements, such as Australia and the Pacific Islands. Cargo went from about 10 per cent of Air New Zealand’s business pre-pandemic, to more than 60 per cent during the pandemic, Palairet says.
Since 2020 it has carried 200,000 tonnes of cargo, and volumes are up about a third on pre-Covid levels, she says.
‘‘Internationally it’s very much a cargo-led network.’’
That will remain the case until isolation requirements for arrivals are removed and there are stable passenger volumes, she says.
Passengers are ‘‘the ultimate subsidy for cargo’’.
The increase in cargo demand has been fuelled by disruption to shipping supply chains, but also greater demand for medical supplies such as PPE and testing kits, as well as e-commerce goods, Palairet says.
During the pandemic Air New Zealand started flying to Guangzhou in southern China for the first time because it saw a cargo opportunity there.
Work is still being done to determine whether it will remain on its network either as a cargo-only, or cargo and passenger flight, she says.
‘‘Certainly from a cargo perspective it’s been a really positive move.’’
There are no plans for the airline to bring in freighter aircraft.
‘‘That’s not a direction we see ourselves going in.’’