The terms under which Cook Islands subsidises Air New Zealand are expected to change, a top government official says.
The government “underwrites” Air New Zealand’s return flights to Rarotonga to the tune of $12 million a year – but that all changed when the borders closed and the planes were mostly grounded.
Financial secretary Garth Henderson confirmed the Air New Zealand underwrite had been suspended under the current Covid-19 slowdown.
It would remain suspended until circumstances changed, and an underwrite was again warranted. “I expect that terms and conditions will change in due course as the operating environment will certainly be different.”
In 2018, the deal was extended to 2022; in April this year, it was suspended.
The Ministry of Finance and Economic Management made a downward adjustment to the underwrite following cancellation of flights due to Covid-19. This resulted in government saving $2.5 million on the deal this financial year.
Air New Zealand now flies weekly to Rarotonga, mostly providing cargo services. There is no indication when flights to and from Rarotonga will return to normal, as discussions between the Cook Islands and New Zealand governments on opening the borders are still underway.
The weekly Los Angeles and Sydney-Rarotonga flight services are key part of the underwrite deal.
According to a 2016 economic review on the airline underwrite agreement, visitors using the underwritten services bring in over $41 million in expenditure.
Halatoa Fua, the chief executive of Cook Islands Tourism, earlier said the country relies heavily on tourism and there was a need to diversify key source markets, given the industry is vulnerable to the economic performance of each market.
Other reasons for the underwrite include that northern hemisphere and Australian visitors travel in 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.
Northern hemisphere and Australian visitors also spend more, and the Cook Islands is able to develop medium to long haul routes, Fua earlier stated.