Investigating aviation subsidy scheme’s impact on domestic aviation during the post-lockdown period: A case study of New Zealand

Abstract

This study investigates the impact of aviation subsidies on domestic aviation markets during the COVID-19 pandemic, focusing on New Zealand’s small-scale regional aviation sector. It examines the effects of the Essential Transport Connectivity (ETC) scheme, the country’s first-ever aviation subsidy initiative using panel data regression models. The findings provide clear evidence that airline subsidies significantly boosted regional air passenger flows, while airport subsidies had limited influence. This research is novel and valuable as it empirically evaluates the effectiveness of the ETC scheme in supporting New Zealand’s domestic aviation during the post-lockdown period, an area that has received little attention in prior studies. It contributes to the growing body of literature on COVID-19-related aviation policies, specifically their role in sustaining regional aviation markets. While this study focuses on New Zealand’s unique context, its implications extend to policymakers globally, offering insights for designing effective aviation subsidy policies that promote regional aviation recovery and growth in the post-pandemic era.