Struggling regional airlines thrown a $30 million lifeline

Monday, 1 September 2025

Regional airlines say they have stepped back from the brink after being thrown a $30 million lifeline by the Government.

Air Chathams chief executive Duane Emeny said concessionary loans the industry had been asking for would provide the circuit breaker to allow the industry to at least maintain what it had.

“This is a really good start. It sort of stops the rot, in a lot of ways.” And it would provide a platform, among a range of other initiatives, “to try and just recover the industry. Because it's a wee bit grim across many different facets of it”, Emeny said.

From there the next move would be to attract good people into the industry as part of a range of initiatives coming through.

The Government said on Monday that it would make up to $30m available in loans to the struggling sector from the Regional Infrastructure Fund.

Three or four weeks ago it looked unlikely that the industry would receive any support, Emeny said.

But Regional Development Minister Shane Jones and Associate Transport Minister James Meager had found a way to provide funding.

Emeny said Air Chathams, which has been flying for about 40 years, borrowed heavily to renew its fleet of aircraft during the Covid pandemic.

The concessionary loans, which would be secured by aircraft, provided a way for Air Chathams to restructure some of that finance, reduce interest costs, and reinvest more of that money back into the business, he said.

But for Sounds Air chief executive Andrew Crawford the relief had come too late.

The cross-Cook Strait airline recently announced it would sell its fleet of six Pilatus PC-12 aircraft because the routes they flew on were no longer viable due escalating costs and he had given up on government assistance.

Regional airlines were critical infrastructure and it had taken six years of lobbying the government, he said. The announcement was a start, “and I certainly think it's essential”.

“But, you know, it would have been so good to have this done before we pulled out of all these routes,” which included Taupō, Westport, Christchurch and Wānaka.

Sounds Air had previously applied to the Infrastructure Fund but was turned down because the airline did not meet the requirements. “It takes a toll on you,” he said.

Crawford hoped to use the new loan scheme to help finance another Cessna Caravan to boost the fleet back to five.

Interlining with the big airlines

The Cabinet also approved funding for what the Government called a “game-changing development” for small regional carriers to seamlessly integrate their bookings with the platforms of major carriers — a process known as “interlining”.

The upgrades would enable passengers to book a single itinerary and flights on different airlines, including the major carriers.

Emeny said Air Chathams and Air New Zealand would soon start trialling integrated bookings.

“If all the smaller airlines get on board with it, and it's their choice, ultimately, it's going to really move the dial, because we are small. Our brands don't have much impact in the market, but the likes of Air New Zealand and Jetstar and Qantas do.

“So, if you're able to leverage off their brand exposure and their sales channels through their websites … then that's really powerful.”

It means Air New Zealand can focus on its network connecting the regional centres to the main centres flying its larger aircraft and leave the smaller regional airlines to maintain connectivity to the smaller towns, he said.

Jones said “reliable air services are critical for the economic and social well-being of regional New Zealand. They enable access to healthcare, education, business, and whānau, particularly in areas where other transport options are limited,” .

“Small regional carriers are under pressure from rising costs, limited access to capital, and ongoing post-Covid disruptions. Without this support, some communities risk losing vital air links and potential regional development,” he said.

Meager said the support was not a bailout, with funding coming in the form of concessionary loans.

“The aim is 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.

“Without intervention, our regional airlines face further service cuts or a complete withdrawal from routes, as we’ve seen in some regions around the country. Once fleet capacity is lost, recovery is difficult and costly,” Meager said.

Jones said the Government had acted “because a combination of factors, including the ongoing after-effects of the pandemic on air services, are placing exceptional pressures on the sector.

“This is a one-off, modest but meaningful intervention that will help prevent further service loss and protect regional connectivity,” he said.

The loans will be administered through Kānoa Regional Economic Development & Investment Unit. Applications will open shortly

The Aviation Industry Association executive Simon Wallace said the Government’s move was a welcome step towards long-term regional connectivity.

Wallace said access to up to $30m loans was a critical lifeline for small passenger airlines at a time when crippling costs were forcing many to cut vital regional air routes.

“We’ve lost several regional routes in the last year in the face of unsustainable cost structures.”

NZ Airports chief executive Billie Moore said regional airlines operated more than 600 flights per week and were the only reliable and frequent transport to some parts of New Zealand. They connected communities with jobs, healthcare, tourism, and emergency services.

For decades, these services had been sustained without government support. In other countries subsidies were standard for regional and remote communities, Moore said.

“In many cases it is now more attractive for operators to sell their aircraft into the international market than to continue running services in New Zealand. Despite this, regional airlines want to keep flying and serving their communities,” she said.

The government package would help stabilise the network and create the conditions for future growth, Moore said.