Wellington City Council is subsidising the new Singapore International Airlines direct service between Wellington and Canberra at close to $9 per passenger in a 10-year deal to secure the No 3-ranked carrier's presence in the capital for direct international flights.

A presentation thought to have been made by Wellington City Council chief executive Kevin Lavery to city councillors was leaked to news media and reveals some 90,000 passengers are expected annually on the route between the two capital cities and that the cost to the city is "less than $9 per passenger," funded by the city's Destination Wellington tourism body, "within budget" and with "no impact on rates."

BusinessDesk understands the council has signed a 10-year agreement with SIA, taking an annual subsidy of $800,000 a year to a total of $8 million, assuming the route continues. SIA is also likely to be receiving incentives from the Australian Capital Territory to establish the first direct service between Canberra and any long-haul destination. Incentive payments to help persuade airlines to try untested or unprofitable routes are common internationally and account for the ability of budget airlines to offer deeply discounted fares to cities seeking tourist growth.

WCC and Infratil, its joint venture owner of Wellington International Airport, are touting the SIA decision to fly Canberra-Wellington as a proof-point for their plans to extend the capital's runway to allow long-haul flights by wide-bodied jets from Asia and the US west coast in a scheme that would require most of the funding to come from Wellington ratepayers and central government.

So far, government ministers have poured cold water on the scheme, one of a clutch of infrastructure projects that the Wellington council has identified as crucial to reinvigorating the Wellington economy.

"The argument that direct flights will not be commercially feasible is now redundant," the slides say. "It proves the runway case has substance. We have secured a tier one airline partner investing millions of dollars now."

"This is much more powerful than a memorandum of understanding promise to come when built. This is a major step toward realising our dream of direct flights to Asia and Europe."

SIA is understood to be willing to fly Canberra-Wellington in part because it avoids the airline leaving the plane on the ground in Canberra between return flights to Singapore and attracting airport fees.

Aviation consultancy Intervistas produced the forecast passenger numbers and expects 19% percent of the payload to be flying to Canberra only, another 11% flying Wellington to Singapore, with 7% coming from the rest of New Zealand and 63% of passengers will be heading beyond Canberra to Asia and Europe. The four-times-a week flights will begin in August.

Numerous transtasman direct flights are already operating between Wellington and the Australian cities of Sydney, Melbourne and Brisbane.

(BusinessDesk)