Key also sits on the board of US cybersecurity giant Palo Alto Networks and was recently hired by private tutoring company Crimson as an "advisory member" of its board.
Walsh says Key has made a significant contribution to Air New Zealand.
"Sir John's outstanding commercial acumen, international perspectives and stakeholder network have been incredibly valuable to Air New Zealand and we are fortunate to have had him as a member of our board," she says.
Key said in a statement it was not an easy decision to step down from Air New Zealand.
"Air New Zealand is a world class company that all Kiwis can be proud of. The fortunes of the airline and our nation are inextricably linked.
"The airline is in great hands under Dame Therese, incoming chief executive Greg Foran, a top executive team and 12,500 staff committed to delivering outstanding uniquely Kiwi experiences every day."
Air New Zealand will advise a replacement director for Key in due course.
Key joined the board in September 2017 after the airline had been on the hunt for a director with international experience.
He was paid a board fee of $100,000 a year and $10,000 for being on the people, remuneration and diversity committee. He also had a travel entitlement of $72,628.
During his time on the board the airline has faced the challenge of dealing with the temporary grounding of some of its Dreamliner aircraft for engine repairs and a more difficult operating environment.
Former board chairman Tony Carter also got into a messy spat with Regional Economic Development Minister Shane Jones over services to the regions.
Key is a friend of former chief executive Christopher Luxon who has made a move into politics for the National Party, winning the candidacy for the Botany seat.
