An Air New Zealand Boeing 787-9 Dreamliner loads up freight last May. Photo / Brett Phibbs
Struggling airlines have been given a further $170 million lifeline for flying freight they say will help rebuild passenger routes when travel recovers.
The Government has already allocated $372m support airfreight connectivity for the original scheme and the new funding will run to October but is unlikely to bring down freight prices which have sky-rocketed during the past 12 months.
All airlines are eligible and Auckland Airport and the Board of Airline Representatives (Barnz) say the scheme has helped keep critical exports and imports going.
General manager of aeronautical commercial at Auckland Airport, Scott Tasker, said the past 12 months have been among the toughest in aviation history, and without the Government stepping in to help New Zealand's international air connectivity would have collapsed – both for passengers and freight.
''The assistance provided to international airlines by the Government up to this point, and now through to the end of October, provides an important financial backstop to ensure airlines have the confidence to schedule and operate the essential cargo and air passenger connectivity that a geographically isolated country like New Zealand and our neighbours in the South Pacific depend upon," he said.
Transport Minister Michael Wood said airfreight capacity is at 90 per cent of pre-Covid levels thanks to the International Airfreight Capacity (IAFC) scheme. Since May last year, Government support has enabled over 6000 flights carrying over 120,000 tonnes of airfreight worth $8 billion.
More than 60,000 people have returned to New Zealand on flights supported by the scheme – 60 per cent of the total number of people to pass through quarantine facilities.
Air New Zealand, Emirates, Cathay Pacific, China Airlines, China Southern and Malaysian Airlines were part of the scheme which will be now be called the 'Maintaining International Air Connectivity' (MIAC) scheme to reflect a change in focus.
"The aviation market will likely start to rebuild later this year, so we've changed and restructured the scheme to focus on the recovery. Going forward, the support programme scheme and it allows for support levels to reduce as passenger numbers rise, giving good value for money,'' Wood said.
Before the pandemic, around 80 per cent of cargo was carried in the holds of passenger aircraft but as this traffic had collapsed more dedicated freight flights have been necessary.
The minister said the scheme could be extended to March next year if necessary.
While capacity is nearing pre-Covid levels the Ministry of Transport notes the scheme does not return airfreight rates to what they were before the pandemic.
''Market rates for airfreight have increased and are likely to stay above pre-Covid rates in the medium term. This is because before the global pandemic, passengers provided the core part of the revenue stream for most air services to New Zealand,'' briefing information for the MIAC scheme says.
The Government won't step in to restore pre-Covid freight rates.
''The Government is stepping in temporarily to enable some air services. The scheme uses a robust market-led approach, requires importers and exporters to pay for their freight on a commercial basis, and aims to help the sector recover as quickly as possible,'' the notes say.
Auckland Airport's Tasker said the number of international carriers had fallen from 29 to 14 during the past year and many were running very reduced schedules – and the number of international passenger destinations served with direct flights dropped from 43 to 20 over the same period.
With only 3 per cent of pre-pandemic passenger volumes now travelling to and from New Zealand, which at times sees international flights operating with a handful of passengers, it was financially challenging for airlines to operate.
"Efficient and cost-effective air transport is about making sure the seats are filled with passengers and the belly-hold is topped up with cargo," said Tasker.
"The MIAC scheme will help safeguard minimum levels of international passenger and cargo connectivity between New Zealand and major cities and aviation hubs in Asia, the Pacific and the Middle East.
''It will also help retain a base level of air connectivity through to late 2021 and early 2022, which is when we hope to see international passenger travel starting to safely recover under a vaccine facilitated pathway," said Tasker.
Barnz executive director Justin Tighe-Umbers said the number of airlines flying to New Zealand is shrinking, as are connections to the rest of the world as the aviation sector continues to reel from the effect of COVID-19 on their financial viability.
"We emphasised to the Government that the rest of the world is opening up and unless we keep New Zealand at least a marginally viable route for airlines, we are going to lose more and more services," he said.
Importers and exporters have welcomed the extension of the scheme.
Lewis Gradon, chief executive of Fisher & Paykel Healthcare, said without support during the past 12 months his company would have not been able to bring in the raw materials and equipment need to manufacture.
"We have been able to significantly expand our manufacturing in New Zealand and supply demand for our product for the treatment of COVID-19 patients," he said.
"The vast majority of our raw material supply chain is from outside New Zealand and we needed channels to remain open to get it here. Then 99 per cent of what we make is exported all around the world, so we need that connectivity to ensure we can get it to our customers."
Rob Connoley, head of airfreight – DHL Global Forwarding, said New Zealand's importers have often been forgotten in stories around air freight.
"The pressure on sea freight has also changed the nature of product moving by air into New Zealand," Connoley said.
"We are seeing a lot more FMCG (fast-moving consumer goods) materials, such as ingredients for food and beverage manufacturing and other grocery items coming to New Zealand by air, he said.
"But the need for capacity extends right through the supply chain. Talk to vehicle importers and you will find they are having to find parts from anywhere in New Zealand to satisfy demand until imports clear, or they're just having to tell customers to wait."
Connoley said New Zealand needed airlines to continue to see the region as an attractive sector to invest in, particularly those flying to and from long haul markets.
Andrew Tilby, managing director of GVI Logistics, said: "You name it, and it is probably coming in or going out by air at the moment. Various products that would previously have come in by ocean are now being flown in, including parts for sectors like forestry. If those industries are unable to keep machinery running, it impacts on their workers."
ExportNZ said while freight costs remain well above pre-Covid levels, the extension shows the government's commitment to support exporters until costs come down and disruptions ease.
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