Pacific told to pull out of airlines

By FRAN O'SULLIVAN

Australian Treasurer Peter Costello wants Pacific Island Governments to pull out of loss-making airlines to clear the way for a regional rationalisation.

But Costello warns that the Governments may need to pay commercial operators a subsidy to ensure flights are continued to lowly populated, far-flung areas.

Costello's comments came yesterday after he presented an interim report to Pacific Islands finance ministers on an Australian-funded transport study at their meeting in Rotorua.

"There aren't that many airlines around the world that are making a profit," he warned. "If the Governments keep propping up unprofitable airlines it means there are missed resources for other alternatives such as sanitation, health and housing.

"We would say they would be better to put in place a framework where they could have commercial services provided by commercial operators and use the money for other Government priorities."

More than 20 airlines service the Pacific Island Forum countries. But few are profitable.

Last month Royal Tongan Airlines collapsed, weeks after the Government-owned airline grounded international flights when Royal Brunei Airlines repossessed a leased Boeing-757 in Auckland.

Tongan Finance Minister Siosiua T.T. 'Utoikamanu told the Herald that "speaking as a finance minister" he agreed with Costello that Governments should not own airlines.

"But there are political considerations and social considerations and given the isolated nature of some of our islands and communities we have to make a judgment call."