KEY POINTS:
Pacific Blue says it has no intention of following Air New Zealand and putting up fares as jet fuel prices soar.
"We have no plans to raise prices, we're in the game of lowering them," commercial general manager Adrian Hamilton-Manns said.
Air New Zealand said today it would increase domestic, trans-Tasman and Pacific Island airfares by 3 per cent because of higher fuel prices.
The airline is also not ruling out further price rises if fuel prices do not drop.
Group general manager short haul airlines Bruce Parton said the increase announced today would apply on travel booked from March 26.
Air New Zealand regretted having to increase fares to at least partially recover some of the fuel increases.
"When domestic fares were last increased due to fuel costs in May 2006, the price of Singapore jet fuel per barrel was US$87 ($108).
"Today it has reached US$130 with a US$10 increase in the past month alone.
The airline's favourable fuel hedges - 82 per cent at US$80 a barrel - start to expire later this year, and the picture is even worse next year when just 20 per cent of fuel is hedged, at US$89 a barrel.
Last month the company said increases in unhedged fuel costs and more flights added up to an $81 million fuel-bill rise for the second half of last year.
The price of oil on international markets reached a new peak of US$111 a barrel last Thursday.
The increases apply to travel booked from Wednesday, March 26.
Pacific Blue competes with Air New Zealand on the Auckland-Wellington-Christchurch main trunk. Mr Hamilton-Manns said it had a strong hedging position and did not have a figure at which it would have to put up fares.
"We don't have a pain threshold for fuel that I know of."
Qantas faces an extra $1.2 billion in fuel bills this year and in Australia said it may pass on costs but today had no response to Air New Zealand's move.
