Marty Melville/Getty ImagesAir 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 flight.Services such as Auckland–Kaitaia may carry only a few dozen passengers a day, yet the costs of aircraft, crew, maintenance, insurance and air traffic services remain the same, no matter whether the plane is full or half empty. Rising costs also contributed to Sounds Air scrapping its Blenheim–Christchurch service last year.These short services tend to be less efficient because airplanes spend proportionally more time climbing and descending than cruising, which uses more fuel and increases the cost per passenger.To maintain nationwide connectivity, the country’s regional air network has long depended on Air New Zealand.But higher operating costs, ageing aircraft and fleet constraints have all been helping to quietly erode the model. Higher airport charges and increased Civil Aviation Authority levies have added further pressure.This isn’t just a problem for the aviation industry. For far-flung communities such as Wairoa or the Chatham Islands, fewer flights can mean reduced access to health care, education, tourism and business.Nor is New Zealand alone in facing these challenges. But other countries are confronting them more directly.In Australia, the Remote Air Services Subsidy Scheme funds regular flights to remote communities where commercial services are not viable. This helps maintain essential access for hundreds of isolated locations across multiple states, including many First Nations communities.Norway uses public service obligation contracts, where airlines bid competitively to operate specific regional routes in return for a government subsidy. This ensures essential air links are maintained even when passenger demand is too low to sustain them commercially.India’s UDAN scheme takes a different approach, using subsidies to make seats on underserved routes more affordable. While its results have been mixed, it reflects the same basic idea: regional air links are a public good, not just a commercial service.What should NZ do?To date, New Zealand’s response to this dilemma has largely been reactive, relying on emergency loans to support airlines already under financial pressure.While this provides short-term relief, it does not address the underlying structural issues. A more durable approach would involve three specific policy shifts.First, New Zealand could adopt a public service obligation framework for key regional routes.The government would identify essential air links and competitively tender them to airlines in return for a fixed subsidy, providing certainty for operators while guaranteeing communities reliable connectivity. Longer-term, discounted resident fares, as used in parts of Europe, could also be considered.Second, targeted regulatory relief for thin routes could improve their viability. A tiered system of Civil Aviation Authority fees and air traffic charges would reduce costs for smaller airlines, while also lowering barriers to new entrants.Third, better integration between carriers would strengthen the network. More seamless booking systems and baggage transfers would make it easier for passengers to connect between regional and main trunk flights, improving the resilience and usefulness of regional services.Provincial New Zealand has already seen hospitals centralised, bank branches close and many other services shift online. Air connectivity remains one of the last direct links between smaller communities and the wider national economy.As that connectivity weakens, regions can become less attractive to skilled workers, less competitive for investment and more vulnerable when emergencies occur.Regional airports therefore function as more than transport facilities. They enable regional tourism and support local economies.The thin-route problem is unlikely to be solved by the market alone. But with targeted policy support, New Zealand can preserve a regional air network that serves communities as well as commercial interests.Ajai Jayathilakan does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.