Cooks up for millions more for LA-Rarotonga link

Transcript

It's likely the Cook Islands government could pay millions more a year to guarantee Air New Zealand a profit to fly the Los Angeles to Rarotonga service.

After approaching the market earlier this year for expressions of interest, Air New Zealand has won the contract to continue providing flights to Rarotonga from LA and Sydney.

A new contract is currently being negotiated between the airline and the government.

Leilani Momoisea reports:

Currently, the Cook Islands government pays for the costs of both the Los Angeles and Sydney routes, and guarantees the airline a 10 percent return on the Sydney route. An economic advisor at the ministry of finance, James Webb, says Air New Zealand made it clear that it would be looking for a return on the LA route also, which is likely to be similar to that of the existing Sydney agreement. Mr Webb says last year both routes combined cost the government about $9.5 million, and a rate of return on the LA route will add to this cost.

JAMES WEBB: We've 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.  

The chairman of the Cook Islands Tourism Corporation, Ewan Smith, says long haul air access is essential to the country's tourism industry, as it delivers visitors year round, and is a sound investment.

EWAN SMITH: Our industry here could not survive on just sharp seasonal visitor arrival from the Southern Hemisphere alone. It was built in the early '80s on year-round access, including the Northern Hemisphere, and that's what's been driving quite a lot of the investment here, and so it's essential that it continues.  

James Webb says the government has carefully evaluated both services to make sure they're contributing to the economy above the investment made.

JAMES WEBB: What we've found overall was that Los Angeles and Raro added to the economy and the Sydney route was a small negative. The question that we want to answer is, is the investment - that cost that the government bears - does that return dividends to the economy and to local businesses and to people living here? For Sydney it's almost a line-ball, it's a little bit negative, not a lot, so I guess we're giving it another throw of the dice for want of a better term, to see if it improves because Australia has been a huge growth market for us.

Mr Webb says Australia has been performing well and it's likely that the costs of underwriting the Sydney route will come down. The president of the Cook Islands Workers Association, Anthony Turua, has previously been critical of the governments priorities in spending, including airline subsidies. However, he says as long as there is no disadvantage to workers, he is supportive.

ANTHONY TURUA: The hospitality sector is our number one revenue earner. The more tourists we get on the island, the more revenue here, the more purchasing power that our tourists comes on board. So long as this negotiation doesn't disadvantage workers, and if it's making ends meet for the employer and employee, I'll fully support it.

James Webb says the government may look at incentives or ways to reward Air New Zealand to fill more seats on the plane, because that will also bring the cost down for the government. He says it's hoped that negotiations with the airline will be wrapped up by the end of January.