It's fight or flight: Air NZ slashes fares

Air NZ is slashing domestic fares in competition with Jetstar.

Air New Zealand plans to reduce domestic fares, as Jetstar threatens to touch down in Hawke's Bay.

The national airline said yesterday it would pour more capacity into its routes over the coming year and this would mean cheaper fares. It would offer more than two million domestic fares for less than $100.

Its lead-in fares have already dropped by up to 40 per cent on dozens of routes this month.

Chief executive Christopher Luxon said the potential arrival of Jetstar on regional routes, alongside other smaller airlines, would increase competition.

Jetstar announced in June that Hawke's Bay Airport was among seven regional airports from which it would add four to its schedule for new services beginning in December. A spokesman said yesterday a decision could be expected "within weeks".

Hawke's Bay air services campaigner Simon Nixon said he wasn't surprised Air NZ was slashing fares.

"I think the greatest effect on Hawke's Bay fares will be the threat of Jetstar coming." He said Hawke's Bay would "have to be" one of the more appealing options for Jetstar.

"Hawke's Bay has the passenger numbers - we have to be in the top two."

Air New Zealand's fares announcement came as the airline reported its earnings before tax were a record $474 million and bottom-line net profit $327 million for the financial year to June 30.

Mr Nixon said Air NZ should make public the amount of money it made on domestic routes where it was the dominant airline.

"Don't get me wrong, it's good airlines make money - they're a business - but [in Hawke's Bay] it's a case of abusing a dominant position, which they've been doing for years."

An Air NZ spokeswoman said lower air fares had already been introduced for Hawke's Bay passengers.

"The lead-in fare between Auckland and Hawke's Bay and Wellington and Hawke's Bay has been reduced from $79 to $59 and Christchurch and Hawke's Bay has been reduced from $89 to $69."