18 Dec 2013

Cooks Govt could pay to guarantee Air NZ profit on Raro service

6:34 am on 18 December 2013

The Cook Islands government could pay millions more a year to guarantee Air New Zealand a profit on its Los Angeles to Rarotonga service.

Air New Zealand has won the contract to continue providing flights to Rarotonga from LA and Sydney, and a new contract is being negotiated.

Currently, the government pays for the costs of both routes, and guarantees a 10 per cent return for the Sydney route.

An economic advisor at the ministry of finance, James Webb, says it's likely the contract for the LA to Rarotonga service will be similar to that of the Sydney agreement.

He says both routes combined cost about 9.5 million dollars last year, and a rate of return on the LA route will add to this cost.

"We have budgeted for about 12.5 million, but of course fingers crossed it comes in less than that. It's a huge cost for us, we're a small economy so for us it's very important that we make sure that we're actually doing it properly and getting a return from this. Being a remote island country, we rely on tourism, and we rely on accessibility to tourists, and so without that, there's a large part of our economy which isn't being serviced."

James Webb says the LA route has been found to add to the economy, however there is a small loss associated with the Sydney route.