Two regional airlines thrown $22m lifeline as fuel costs soar

 

Two regional airlines facing "systemic issues" and surging fuel costs have been thrown a lifeline with a $21.7 million government loan.

The funding, part of a $30 million regional connectivity package from the Regional Infrastructure Fund (RIF), was announced on Friday for Air Chathams and Sounds Air to refinance debt and upgrade fleets.

Island Air, which connects Tauranga and Motiti Island, has been loaned $252,000 for fleet maintenance.

Air Chathams chief executive Duane Emeny said the support acknowledged "long-standing challenges" airlines faced in connecting New Zealand’s regions.

Emeny said regional airlines were navigating "systemic issues" even before the current high cost of fuel.

While the airline was working through how to allocate the money, the focus remained on maintaining services for healthcare, business and travel.

Associate Transport Minister James Meager said regional connectivity was vital but the industry was under pressure, with some crucial routes at risk.

"In places like the Chatham Islands, regional airlines are the sole connector for residents to the mainland," Meager said.

"Losing those routes would risk people being cut off from the rest of the country and disruption to the delivery of essential services."

The NZ Airports Association described the airlines as the "heartbeat" of regional economies but warned that the operating environment had shifted since the funding was first proposed.

Association chief executive Billie Moore said jet fuel bills had doubled and were continuing to surge, meaning the loans now had to "work much harder" to stabilise the network.

"This funding is a critical stabiliser, but it will need to be the first step in further policy interventions," Moore said.

Minister for Regional Development Shane Jones said the regional airlines funding package was created in late 2025, several months prior to the current Middle East conflict.

“The impact on fuel supply and pricing has had ramifications across the world, including in the aviation sector. The situation in New Zealand is no different.

“The Government acknowledges it is now an even more challenging commercial environment for regional airlines, and there is uncertainty about the future,” he said.

The news comes as Nelson-based carrier Originair said its Westport to Wellington service would stop after May 1 without a direct government subsidy.

Originair managing director Robert Inglis said the service was running at an annual loss of $250,000, which could double due to fuel costs.

However, Meager previously said such a subsidy would sit "outside of the terms agreed to by Cabinet" for the current fund.

Jones said the government had requested advice from officials about the potential for temporarily adjusting loan conditions to help regional airlines meet their obligations in adverse conditions.

He expected to be able to provide more information in the coming weeks.

Kānoa, the Regional Economic Development and Investment Unit, is continuing to progress applications for support from other airlines.

Golden Bay Air was granted the first loan in February.

Source: Stuff 24 April 2026

17.2m for Air Chathams

4.5m for Sounds Air

$252000 for Island Air