Air New Zealand’s concerning recent moves to cut some regional flights have come on the back of soaring jet fuel prices. But they also highlight a deeper problem that has been worsening for years.

The aviation industry has long warned of decline within New Zealand’s regional air network, with recent seat capacity on regional routes reportedly well down on pre-pandemic levels.

Last September, months before the crisis in the Middle East piled on more pressure, the government announced it would making available up to $30 million in concessional loans to help keep small regional airlines operating.

No matter how well they are run, however, operators such as Sounds Air, Air Chathams and Originair face an unforgiving economic reality.

Unlike larger airlines, they cannot offset losses on thin regional routes with profits from busier services. Short flights on small aircraft generate relatively little revenue but still incur many of the same operating costs.

This means even modest increases in costs, or slight drops in passenger numbers, can quickly make a route commercially unsustainable.

The ‘thin route problem’

Aviation economists use the term “thin-route problem” to describe routes where passenger numbers are too low to spread the fixed costs of operating a........

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