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If Dunedin wanted transtasman flights reinstated then the community would need to underwrite any losses, Air New Zealand chief executive Rob Fyfe said.
Responding to criticism from a Dunedin-based traveller over the airline's decision to fly seasonally rather than year-round across the Tasman, Mr Fyfe said in an email the city should follow Rotorua's example.
Rotorua, where transtasman flights are scheduled to start from December, had made a "financial contribution to the service to help ensure its success", he said.
"If the Dunedin community wanted to have a similar discussion with us about underwriting the cost of any losses Air New Zealand would make operating a year-round service, we would be happy to have that discussion - but to date we have not been given that indication."
Mr Fyfe said it cost $100 million each week to operate the airline and it had little choice but to withdraw loss-making services rather than put the airline "at risk".
Attempts to contact Mr Fyfe for clarification were unsuccessful.
However, an Air New Zealand spokesman said Mr Fyfe was overseas and "would not breach the trust and privacy by referring to private correspondence between himself and a Dunedin resident without their permission to do so".
In response to questions from the ODT, the airline wrote a letter to the editor from group general manager short-haul airlines Bruce Parton, which reiterated much of what Mr Fyfe disclosed.
"Dunedin already has transtasman services which are sustainable on a seasonal basis, but to increase again to year-round in the current environment would require a sharing of the financial risk if they were to continue and be operated at a loss.
"We are happy to have that discussion with Dunedin leaders, but to date we have not been given that indication and, at this point, continue to work with the Project Gateway team to market Dunedin in Australia," he said.
City leaders say they have not been approached to share the financial risk of transtasman flights.
Dunedin Mayor Peter Chin said the city had supported the airline "from day one" - mainly in the form of marketing - but was unlikely to underwrite non-performing routes.
Dunedin International Airport chief executive John McCall said the airport regularly met Air New Zealand staff as part of Project Gateway to "grow the market", but discussions over the underwriting of flights had never been raised.
"At the end of the day, if the service can't stack up without a subsidy, then they are doomed to fail."
Underwriting flights would not be fair to ratepayers, or to Air New Zealand rival Pacific Blue, which was to begin transtasman flights from the airport next month, he said.
Otago Chamber of Commerce chief executive John Christie said underwriting flights was an option "worth exploring" and could be driven by local businesses rather than ratepayers.
A Rotorua Airport spokeswoman said "collaboration" between the airline and industry was in place, but she declined to say whether flights were underwritten.
Aviation Industry Association chief executive Irene King said it was likely transtasman flights to Rotorua were underwritten, which was part of "a global phenomenon on marginal routes".
Civic leaders would need to weigh up the cost benefit of "sharing the risk" on underperforming routes in order to create wealth and jobs, she said.
Air New Zealand announced in April it would reduce transtasman services from Dunedin to operate on a seasonal basis.