Air Chathams CEO Duane Emeny says Whanganui remains the airline's strongest North Island route. Photo/ NZME
Air Chathams CEO Duane Emeny says Whanganui remains the airline's strongest North Island route. Photo/ NZME
Air Chathams’ boss is pleased with the possibility of Government loans for regional airlines, but said “the devil will always be in the detail”.
On September 1, Regional Development Minister Shane Jones and Associate Transport Minister James Meager announced that up to $30 million in loans would be available, tosupport at risk regional routes.
Air Chathams flies between Whanganui and Auckland – its best-performing North Island route.
Meager said the support was not a bailout, with funding coming in the form of concessionary loans.
Air Chathams chief executive Duane Emeny said it was the first time the Government had recognised regional air connectivity as being “in a similar vein to” sectors such as road and rail.
“It is a very marginal business to start with, and [flying] to some of these smaller regions and towns, it’s even harder,” Emeny said.
“[Meager] is addressing the initial elephant in the room around how we stop the rot, and then, I assume, he will be coming out quite soon with the rest of the action plan, which will focus on the whole system.”
Emeny said structural costs had come in after Covid-19 – “supply chains have crippled us” – and if something did not happen, there would be a continual decay of connectivity.
“I think the Government just wants to draw a line in the sand.”
Upgrading the Air Chathams fleet had increased the company’s debt significantly, and that was where the most support was needed, Emeny said.
“We need to get that down to a more manageable level, in terms of what we pay for that finance.
“The devil will always be in the detail of what the concessionary loan structure looks like compared to what we’ve currently got, if you’re looking at refinancing or investing in new aircraft.
“But this is a big sigh of relief for a lot of airlines, and probably customers in areas being flagged for maybe not having an air service come next year.”
Concessionary loans have more favourable terms than what can be secured in the marketplace.
Air Chathams chief executive Duane Emeny.
Emeny said Whanganui remained Air Chathams’ best-performing North Island route and was not in danger of losing its service.
In January, the airline announced it was ending its Auckland to Norfolk Island route, with its Auckland to Whakatāne route also under threat.
Air Chathams has lost more than $1 million on that route since April 2023.
Meager said the aim of the loans was to stabilise the sector and support regional routes in the short to medium term.
“This is not intended to meet all the airlines’ capital needs but to provide targeted relief for such things as aircraft leasing, maintenance and debt refinancing.”
Emeny said any cost savings after securing the Government loan could be reinvested into provisions for future engine replacements and heavy maintenance checks.
In a statement, the Government said Cabinet had also approved funding for digital upgrades that integrated regional transport bookings with the platforms of major carriers.
“Known as interlining, the upgrades will enable passengers to book a single itinerary and flights on different airlines, including the major carriers,” it said.
“For the smaller guys like us, at least we know there is some funding for us to actually set this up,” Emeny said this week.
“It’s a huge amount of work that has to be done to align a very small operation to a large, corporate operation.”
He said Air Chathams would never have the marketing budget of bigger companies, so being able to leverage the Air NZ brand was “massive”.
“We are very hopeful that by the end of October, we will testing [an interline agreement] on one of our domestic routes.”
The loans will be administered through Kānoa, the Regional Economic Development and Investment Unit.
Jones, the Regional Development Minister, said without intervention, regional airlines faced further service cuts or a complete withdrawal from routes.
“Once fleet capacity is lost, recovery is difficult and costly,” he said.
Mike Tweed is a multimedia journalist at the Whanganui Chronicle. Since starting in March 2020, he has dabbled in everything from sport to music. At present his focus is local government, primarily Whanganui District Council.
