Low domestic airfares ‘still make sense’

Air NZ’s domestic airfare shake-up has resulted in more Kiwis flying from the regions.

Air NZ started discounting regional airfares in smaller regional markets early this year. The airline cut entry level airfares by up to 50 per cent on 41 domestic routes. More than 750,000 seats a year would be available for less than $50, it said. Seat only fares included Auckland to Gisborne or Kerikeri for $39 and Auckland to Blenheim or Nelson for $49. Former chief executive Christopher Luxon described the discounting as the airline’s ‘‘biggest pricing shake-up in more than 10 years’’. Acting chief executive Jeff McDowall said the lower fares had increased ‘‘leisure’’ demand.

He said passenger numbers from Timaru, for example, had risen by more than 20 per cent since discounting started. Timaru airfares had gone from close to $100 to about $50, he said.

Regional discounting ‘‘still makes sense’’ and the airline saw value in the strategy because it was filling seats that would otherwise be empty.

In September, rival airline Jetstar announced it would pull out of its New Zealand domestic turbo-prop regional flights at the end of this month.

It started flying to regional centres in December 2015 and offered up to 130 return services a week during the peak season across five routes – Auckland and Nelson, Napier, New Plymouth and Palmerston North and flights between Nelson and Wellington.

In response, Air NZ offered discounted airfares to Jetstar customers affected by its withdrawal. McDowall said Air NZ had moved as quickly as it could to get more capacity to the markets Jetstar had exited.