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Cash set aside for Air NZ subsidised Los Angeles, Australia routes

Friday 11 June 2021 | Written by Emmanuel Samoglou | Published in Economy, National

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Cash set aside for Air NZ subsidised Los Angeles, Australia routes

Amidst an environment of continued uncertainty, the Government is still banking on a positive trajectory in the handling of the Covid-19 pandemic and the possible opening of tourism to additional markets.

Government intends to set aside $6.5 million over the next 12 months to subsidise Air New Zealand and potentially reinstate direct flights with Los Angeles and Sydney - should current border restrictions be lifted.

Known as the airline underwrite, over the past 10 years the government has paid Air New Zealand roughly a 100 million dollars in subsidies. In return the Kiwi airline has operated the direct flights, which stakeholders say bring in travellers from the lucrative Australian, North American, and European markets.

Following the $6.5 million set aside for the 2021/22 fiscal year, government projects to spend $10 million in each of the following three years on the underwrite.

In 2018/19 – the last non-Covid year – the subsidy paid to Air New Zealand to underwrite the Los Angeles and Sydney routes was recorded at $12.9 million.

In 2018, the deal was extended to 2022 but was recently suspended following the Covid-19 pandemic and the closing of the nation’s borders in April 2020, allowing the government to save millions of dollars.

Cook Islands Tourism Industry Council president Liana Scott said current conditions make access to the Australian market lucrative, as Fiji – traditionally a popular destination for Australians – is currently grappling with a Covid-19 outbreak.

“… the potential of putting the Cook Islands on the map to Australians is an opportunity not to be missed and this may well be the opportune time to show Australians another tropical destination of choice,” Scott said.

“There are exciting prospects to have direct flights from Sydney, ideally 2-3 per week so that it gives that variety of length of stay for Australians.”

According to a 2016 economic review on the agreement, visitors using the underwritten flight services were said to have brought in over $41 million in expenditure annually.

Government officials and tourism industry stakeholders say the arrangement allows the Cook Islands to diversify key source markets, given the vulnerability of the industry and the economic performance of each market.

Further justification for the arrangement cited by officials mentions northern hemisphere visitors tend to travel to the Cook Islands in the low and shoulder seasons, and a higher proportion of northern hemisphere visitors travel to the outer islands compared to New Zealanders.

A range of factors also permit northern hemisphere and Australian visitors to spend more, it has been noted.

Chamber of Commerce chief executive Eve Hayden said the opening of the Cook Islands to additional markets will help the government reach the revenue forecasts laid out in the 2021/22 budget.

“If flights from NZ increase towards pre-Covid numbers, and if we open a bubble with Australia, that will clearly change the landscape and increase revenue,” Hayden said.