Government is looking at whether a subsidy for air transportation is a valid way to help reduce cost of air transport.
Responding to a question from the youngest Member of Parliament (MP) Te-Hani Brown in Parliament on Tuesday, Finance minister Mark Brown said they have looked at the air transportation subsidy issue alongside the ongoing subsidy on sea transportation.
MP Brown asked if there were plans to subsidise airfares for those using the domestic airline to travel to Rarotonga.
In his reply, Minister Brown said the government had been concerned at the cost of travel between outer islands, both for air transportation and also for sea transportation.
He said the government had set aside half a million dollars a year to subsidise sea transportation and they have started a pilot project for the subsidy for sea transports, in particular for freight.
“Hopefully the information we have gathered from the companies responsible will enable us to work out whether we need to put more money aside to subsidise sea transportation between our islands,” Brown said in his reply.
“Of course we have also looked at the air transportation, what ways we can make air transportation cheaper for our people and this is the difficult question because the subsidy is basically saying that you, the taxpayers of this country, will pay for the airfares of the people who are traveling on Air Raro.
“Is that what our people want for their taxpayers’ money to make it cheaper to fly people between the islands? This is a valid question and we have to look if there is a solution to subsidise air travel, or do we look at other means like introducing competition as a means to reducing prices.”
Brown said there was no obstacle to any company wanting to come in and start a domestic airline.
However he said the decision to enter into the domestic airline business would came down to the market.
“It’s about how much market share can be sustained by two companies and I suspect it appears that the market we have for domestic air travel makes it difficult for a second company to come in.”