Air Chathams has missed the due date to repay a $500,000 Kāpiti Coast District Council loan.
Airline chief executive Duane Emeny said the loan would be repaid and asked for a 10-business day extension to work out a payment plan, but warned there was "a significant risk" to the direct Paraparaumu to Auckland service if the council chose to declare the loan in default.
The council agreed to the interest‑free loan in November 2020, during the Covid‑19 pandemic, to help the airline restart flight operations. It came on top of a separate $20,000 Covid‑19 support grant.
A proactively released response to a Local Government Official Information and Meetings Act (LGOIMA) request in late 2025 said the council agreed to extend the original repayment date of November 22, 2025 to May 2026. In response to a separate LGOIMA request earlier this month, the council said the repayment date was "end May 2026".
"Air Chathams' argument is that we've continued to provide an air service for five years through the most challenging times in regional aviation, and the money that we've lost in doing that is significantly more than the money that you're owed," Emeny told Local Democracy Reporting on Wednesday.
"That's your decision as a council to make and, if that's the case, then we'll work through it. But what I would say is there's a significant risk to the air service continuing if they choose that path."
Mayor Janet Holborow said on Wednesday it would be inappropriate for her to comment as negotiations were continuing.
On Tuesday a council spokesperson said officials were in "active discussions" with Air Chathams on paying the loan but did not elaborate, citing LGOIMA provisions that it could jeopardise negotiations and for commercial reasons.
Other Covid-related assistance the airline received from North Island councils included a $350,000 loan from Whakatāne District Council, a $30,000 marketing budget and a $500,000 loan from Whanganui District Council.
The airline asked the Whakatāne District Council last May to write off its $350,000 loan as part of a wider financial package that included waiving 12 months of landing fees at the publicly owned airport, entering a profit‑and‑loss sharing arrangement on the Auckland route, and a further $3m loan to buy a new Saab 340.
The airline later withdrew the request for the new aircraft loan.
Whakatāne councillors agreed to waive the landing fees but rejected the rest of the package, though some left the door open to consider alternatives, including converting the loan to airline shares - a clause written into the loan contract.
In April, the Government loaned Air Chathams $17.2 million through the Regional Infrastructure Fund to refinance debts. Emeny said that was to service interest-bearing debt, which meant the councils' interest-free loans did not qualify.
After Air New Zealand pulled the plug on the Kāpiti Coast-Auckland route in 2018, the district council subsidised Air Chathams to run the direct flights through grants to promote the Kāpiti Coast as a destination and by covering the costs of the vital airfield flight information service, which provides pilots with weather and traffic information to operate safely.
Source: RNZ
Here we go again; Air Chathams is back asking for concessions.
ReplyDeleteIf the recent $17 million loan was supposedly needed just to service “interest-bearing debt”, it raises some serious questions. How much debt can an airline operating only a handful of 30-year-old turboprops realistically be carrying to require that level of borrowing simply to meet repayments?
More importantly, have the Government and local councils continually providing subsidies, grants, and financial support on behalf of taxpayers conducted any meaningful due diligence? Or are public funds being used to prop up a business model that is just easy money for the family business?
We, the taxpayer deserve transparency and accountability!
It'd be too bad if they dropped Kapiti after this long but maybe Originair would be the next ones up to try make it work with a smaller aircraft than the Saabs
ReplyDeleteSaabs and J32s cost exactly the same to run per hr. The Saab is actually better. The lack of financial acumen around aviation is astounding.
DeleteThese are routes well suited to a 19 seat aeroplane such as a Jetstream and could even offer greater frequency with these size machines. Eagle Air may not have made money but I don’t think it lost money either and Rob Fyfe had structured it to continue with new sim etc. Eagle provided the “social contract” to the smaller towns that the larger turbo props can’t do. Mr Luxon possibly didn’t grasp that.
ReplyDeleteI’m sorry but Eagle was loosing $3m a week and that was a decade ago
DeleteI was working for Eagle at the time of its closure. Eagle lost money on every flight towards the end. Millions and millions of dollars a year. Luxon didn't shutter Eagle for fun, it had to happen (as sad and as heartbroken as I was). Air New Zealand is not a charity, and is accountable to its shareholders.
DeleteNo such as a social contract.
If Eagle could not make the routes work back in 2015, there is no way a 19 seater operator could in these days of horrendous JetA1 prices.
These regional flights are a 'nice to have', but at the end of the day, no airline is a charity.
Fair enough. I thought it was holding its own.
DeleteThe public went mental over the cost of airfares, this was stoked heavily by the media.
DeleteIf you recall, famously John Key had to go and ‘have a word’ with air nz about its regional fares.
This resulted in air nz reviewing its regional operations.
If people were going to moan about the prices charged to fly 6 people from Whangārei direct to Wellington. While the airline lost over a million per month on the 19 seat business, then it had to go.
The public were very clear, they didn’t want to pay for it.
So over 300 million was spent buying new ATRs to free up the Dash 8 operation to pick up what was salvageable of the Beech network.
Reflecting on my aviation business management studies, research showed that regional airports in New Zealand become harder to sustain when they are within about a 2hr drive of a larger hub airport.
ReplyDeletePPQ is a good example. Less than an hour from Wellington, it sits within WLG’s catchment area and competes with an airport offering far greater domestic AND international connectivity.
Hamilton faced a similar challenge. Despite serving a sizeable population, its proximity to Auckland Airport has restricted passenger growth.
That said, we studied why comparable catchment areas in the UK, such as Luton vs Heathrow (in comparison with HLZ & AKL) where sustainable, The result was scope and scale, whereby even inside half of the catchment area it’s still served nearly millions, New Zealand simply does not have that kind of scale.
Moreover, it was seen in NZ travellers often go beyond the 2hr drive catchment area in some circumstances too. For example passengers from Whanganui choose to drive to Wellington rather than use local air services.
For memory, the conclusions drawn were, many regional airports in New Zealand struggle because they lack the scale and demand needed to compete with larger hub airports. This was further compounded by broader social economic factors, including lower disposable incomes, a weaker New Zealand dollar, and rising travel costs, all of which suppress regional demand.
Your studies will also have included the crippling CAA and Airways charges. Not to mention the airport companies (mostly council owned) saddling the in most cases one airline tenant with all their costs, that are translated to higher air fares.
DeleteThis means less people travel, the cycle continues until the entire thing is unsustainable.