Flight Centre has fired the latest shot in the airfare war, with Air New Zealand return flights to London dropping below $1300

The agent says its $1299 fare is the cheapest ever for Air New Zealand flights to London - traditionally more expensive than other European destinations to fly into because of high taxes.

And while fares dropped to below $1000 on Philippine Airlines to London earlier this year, the flight was in several sectors and Air New Zealand is regarded as a more premium carrier flying the quickest route to the British capital on more modern planes.

Other premium carriers including Cathay Pacific, Qatar and Emirates have been offering fares of less than $1500 for flights to Europe this year in an intensifying battle.

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House of Travel got this week's price skirmish started with $1649 fares on Monday, and helloworld followed with a $1399 return to London and Manchester the next day.

The Flight Centre fares from Auckland, Wellington or Christchurch are on sale until November 17 for travel between March 5 and June 19.

Flight Centre NZ managing director David Coombes said the fares were evidence of an extremely competitive market.

"This current level of competition is unprecedented and we can only advise that Kiwis take advantage of this incredibly competitive marketplace while it lasts."

He said it was unusual for Air New Zealand to offer such heavily discounted seats on the London route. He said there were "plenty" of seats in the deal.

"My interpretation is that the excess capacity is starting to impact further and wider."

Not long ago Air New Zealand fares would have been double today's deal.

It's not just airlines going toe to toe; agents also take a hit on such heavily discounted fares.

Coombes said that the relatively high New Zealand dollar versus the British pound had helped boost the number of Kiwis flying to Britain. So far this year more than 87,000 New Zealanders had made the trip.

During the last 18 months the number of airlines flying long-haul services had soared out of Auckland through the Middle East, Asia and during summer, via the United States. This was pushing down prices. While oil prices have crept up recently, they are still half of what they have been during spikes in the last 10 years and aircraft are more efficient, meaning airlines have more capability to absorb fuel-price rises.

Flight Centre's fares today are in economy rather than premium cabins, although Coombes said "watch this space."