Air New Zealand’s announcement this week that it will next year end services to Westport, Kaitaia and Whakatane will be a blow to those places. All three are small towns. Whakatane has a population of 15,000, Kaitaia 5000 and Westport 4000. Serving towns of that size in a financially sustainable way is difficult anywhere in the world. Air NZ says it has been losing money on the fleet it has serving those towns. But an air service can be considered nowadays to be as essential as roads and should be judged by more than purely financial criteria.
It is an easy assertion to make but what is the rational case for saying a town of 4,000 people must have air access?
Do all towns in Australia with 4,000 population have air access?
The airline has often been under pressure about its regional services. An University of Auckland study of air services in similar-sized countries to New Zealand last year found that Air NZ had the most coverage of centres with populations of 20,000 or more and the cheapest fares.
Air services should be on a user pays basis. If enough people in a town are willing to pay enough for air service, then a company will provide it. But I see no case for a subsidy.
But an air service is an essential service nowadays. The Government spends billions providing roads and underwriting the railways. Support for air services, even if unprofitable, to places that need them would not be a big step further.
Roads are funded primarily by petrol tax, on a roughly user pays basis. No case has been made for taxpayers to subsidise air services to small towns.