The Cook Islands Ministry of Finance and Economic Management recently released an economic review which it had commissioned on the economic impacts of the Cook Islands Government underwrite of weekly non stop long haul access aviation services from Los Angeles and Sydney to the Cook Islands. The review was undertaken by Covec Economics, http://www.covec.co.nz/. Covec is one of New Zealand’s leading economic research consulting firms with significant research experience in tourism economics. Covec economics concluded that:
- the underwrite of LAX-RAR increased Cook Islands GDP by between around $6.6 million and $7.7 million per annum from the period 2010 to 2012. Overall, the LAX-RAR underwrite is estimated to make a net positive contribution per annum to economic activity of around $6 million per annum in the Cook Islands between 2013 and 2017. Key features of the LAX-RAR underwrite are that the:
- LAX-RAR service is used by around 80% of visitors from the US and Canada in at least one direction. It is also used by around 30% of visitors in the ‘Other’ category (mostly Europe);
- loss of the LAX-RAR service is estimated to reduce international visitor arrivals by around 9,500 per year;
- additional visitors generated by the underwrite agreement spend around $15.5 million per year; and
- generates around 2,000 additional visitors per year to the outer islands (mainly Aitutaki and Atiu).
- the underwrite of SYD-RAR decreased Cook Islands GDP by between $0.3 million and $0.9 million per annum from the period 2010 to 2012. Overall, the SYD-RAR underwrite is estimated to make a net marginally negative contribution per annum to economic activity of around $0.1 million per annum by 2017. Key features of the SYD-RAR underwrite are that the service:
- is predominantly used by residents of New South Wales in Australia, while Australian residents from other states tend to travel via Auckland; and
- generates around 750 additional visitors per year to the outer islands (mainly Aitutaki and Atiu).
Minister Brown welcomed the report and pointed out that it had clearly established a solid base on which take further decisions on the underwriting of airline services to the Cook Islands.
“When we first came into Government we were presented with a scenario where we had to sign on the bottom line or Air New Zealand would cease the Los Angeles service due to non-commerciality, I believe the approach being taken now is a robust approach to making these sorts of decisions – an evidence based approach based on researched facts leads to informed decisions and ultimately better economic outcomes for the Cook Islands.
”Ewan Smith Chairman of the Cook Islands Tourism Corporation outlined how the study had confirmed the route underwrites as essential to the strategy of diversifying source tourism markets.
“It diversifies our market, ensuring that we are not totally reliant on New Zealand tourism. Our industry was built on year round visitor flow with a mix of Northern and Southern Hemisphere traffic and we can now accurately quantify the benefits of that strategy to the overall economy."
Cabinet have now requested that MFEM and CITC to work closely together to seek expressions of interest from established commercial international aviation operators for the provision of long haul air route services to Rarotonga, Cook Islands for a period of four years from November 2014 through to November 2018.
Halatoa Fua, Chief Executive of the Cook Islands Tourism Corporation pointed out that a prospectus had been finalised and will be shortly circulated to all commercial carriers who may have an interest in providing such services.
The current agreement with Air New Zealand to provide non stop weekly services from Los Angeles and Sydney to Rarotonga is until October 2014.
For further information please contact:
Ewan Smith (firstname.lastname@example.org) – Chairman, Cook Islands Tourism Corporation,
Richard Neves (email@example.com) – Financial Secretary, Ministry of Finance and Economic Management.
Documents available to download;
>>Covec Economics ReportCovec_Economics_Report.pdf1017.62 KB
>>Underwrite ProspectusUnderwrite_Prospectus.pdf241.56 KB