Air Chathams Saab340 aircraft at Whakatāne Airport.
Whakatāne District Council has agreed to waive airport fees for Air Chathams for the next six months but has said no to other forms of financial support the airline has requested.
The council also voted to run an expressions of interest process with the aviation sector, asking it to submit proposals for business-friendly Auckland and Wellington services.
“We are not an airline,” Whakatane Mayor Victor Luca told the airline’s owner and chief executive Craig Emeny and chief commercial officer Duane Emeny on Thursday.
The Emenys had fronted up to a council meeting to field questions from elected members about their requests for financial support made at a public excluded workshop in early March, which it said it required to continue operating the Whakatāne to Auckland route.
Air Chathams warned in April that it was considering withdrawing from the Whakatāne to Auckland route as it had lost more than $1 million on the flight leg since April 2023.
Their request from the council included writing off a $350,000 five-year loan paid from the council as support to restart flights during Covid-19 restrictions, 12 months relief from paying landing fees with the option to extend if route viability is poor, entering into a 50/50 profit and loss share agreement and providing a loan to buy another Saab340 aircraft.
Air Chathams has since withdrawn the request for the loan to buy the aircraft as circumstances had changed to allow it to keep a Saab340 that is currently leased to Tonga’s Lulutai Airlines for three months.
It had previously planned to sell the aircraft to a Canadian airline late last year to increase its business’ liquidity, but the sale and purchase agreement had fallen through.
It proposed that when the Tongan contract ended at the end of June, the aircraft could be used to restore Whakatāne’s business flights, provided the council was prepared to support the airline.
“If we could work something out with council then we could bring back that dedicated aircraft.”
Air Chathams had provided an alternative proposal to the chief executive and two councillors but this had not been formally provided to council or tabled for consideration.
It was not made clear at the meeting what the new proposal involved.
Duane Emeny said the company believed the Saab340 could work in Whakatāne.
“We do truly believe that if we can partner with you properly and get this aircraft back on the schedule that people want, that five-to-10 years down the track, you’ve got a thriving Eastern Bay of Plenty.
“You’ve got population growth, business growth, and you’ve got air connectivity to support that. I do think the Government is going to see the value in that very soon, and it will benefit you.”
Luca said he didn’t think anyone at the table wanted to see the district lose an airline.
“But we are a public service institution and we’re here to serve the public – all of the public ... [Airlines are] a difficult business to make money in especially in provincial areas and I do think that, rather than us subsidising, it should be central government that comes to the party with its big chequebook.
“I think we need to do more along the lines of advocating to them.”
The council was unanimous in rejecting the proposal of entering into a profit and loss share agreement or providing a loan to purchase a new aircraft.
Some of the councillors said, while they would not support writing off the $350,000 loan made in 2020, they would support an option to convert the loan to shares as this was a clause written into the loan contract.
Air Chatham has said that when the loan was initially provided it was never the intention of the council of the time for it to be repaid. It had simply been a quicker way of providing financial support for the airline than having it apply for a grant.
Councillor Julie Jukes, who was part of the council at the time, partially corroborated this at Thursday’s meeting.
“If I had to be honest, I don’t think we did have any expectation that it was likely to actually be repaid.
“We needed to keep the airline going and it was hopeful that it would be able to be repaid, which was why it was set up as a loan.”
Councillors voted no to writing off the loan, but most indicated they would be willing to consider some other option such as converting it to shares.
Councillors Tu O’Brien, Gavin Dennis and Ngapera Rangiaho were adamant that it needed to be repaid.
“It needs to be paid back. It’s ratepayers’ money, not ours. I would be happy for them to pay it off at $50,000 a year,” Dennis said.
- LDR is local body journalism co-funded by RNZ and NZ On Air.