Qantas is cutting flights across the Tasman while its budget subsidiary Jetstar will fly more services on the cut-throat route where airline margins have traditionally been thin.
The Qantas group, under financial pressure from intense domestic competition in Australia and suffering heavy long-haul losses, said the changes were designed to better reflect seasonal peaks and deliver a better mix of business and leisure services.
A spokeswoman said there would be three fewer Qantas flights a week during the peak season and 15 fewer during the low season.
The Qantas services will be cut from October and while Jetstar will add up to seven new services, it is quitting its three times a week Auckland-Adelaide service.
Qantas has been popular with corporate travellers, offering a business class cabin, while Jetstar is aimed at the leisure market and has no business class. Any reduction in competition could force up prices on the route, where about 1.2 million Australian tourists fly to New Zealand and 1.3 million Kiwis fly the other way each year.
During the low season Qantas capacity will drop by 12 per cent with all cancelled routes out of Auckland to Australia's main eastern cities. The number of flights will fall to 82 a week during the low season.
The decision to cut back on the Tasman follows an announcement by Qantas last month to freeze domestic capacity growth in Australia in the face of competition from Virgin Australia.
Qantas International chief executive Simon Hickey said the airline was "becoming more dynamic and more flexible" to respond to market conditions on Tasman routes.
"This has seen us take advantage of seasonal opportunities, like the Perth to Auckland service we started last summer. On the flipside, we'll reduce flights at times of the year when demand naturally drops back due to seasonal factors."
Hickey said transtasman was "a really important corridor" for Qantas premium travellers. The Qantas spokeswoman said it was difficult to calculate the net impact on the number of seats given some new services could be started.
Qantas runs its transtasman flights with a New Zealand-based operation, Jetconnect, who crew eight Boeing 737-800s on the route and are paid less than equivalent Australian workers. Jetstar is believed to have even lower costs.
As part of a global Qantas alliance with Emirates, the airlines' better co-ordinated services was approved with minimum capacity conditions to ensure competition was maintained. Qantas says that after the changes announced today the capacity requirements of regulators would be met.
At the time New Zealand Transport Minister Gerry Brownlee approved the alliance he said he was confident that competition, cost savings along with capacity commitments would keep fares in check.
Jetstar Australia and New Zealand chief executive David Hall said passengers who had booked on the Auckland-Adelaide service would be re-booked via Melbourne or Sydney.
"While we have worked hard with tourism organisations and our airport partners, the [Adelaide] route has not performed in line with expectations." Qantas has been sternly challenged at home by Virgin Australia which is eating into its corporate and government travel market and hurt by Virgin's alliance with Air New Zealand across the Tasman. That partnership has allowed Virgin and Air New Zealand to co-ordinate services and harmonise their booking systems.
Although Virgin suffered a big half-year loss, investment from Air New Zealand and other airline stake holders Etihad and Singapore Airlines has shored up its operations. This has angered Qantas which has told the Australian government it has been disadvantaged by investment in Virgin by foreign airlines with state ownership. In February Qantas posted a A$235 million half-year loss and announced plans to cut 5000 jobs.