Jetstar's regional operations could boost the economy of four centres it serves by about $40 million a year, according to Infometrics research.
The regional GDP growth could support up to 600 new jobs according to the research which notes domestic air travel prices have fallen by close to 10 per cent during the past 12 months.
Jetstar Group CEO, Jayne Hrdlicka, said the report highlighted how important cheap fares were to growing local economies.
"It's estimated that for every $1 spent on aviation, a further $10 is spent in the local economy," she said.
"As this report shows, the benefits of lower fares don't stop at the consumer. Competition and choice in airline travel is also a strong driver of growth for the wider economy in the markets that we serve."
Last December Jetstar began flying between Auckland and Nelson and Napier. Flights from Auckland to New Plymouth and Palmerston North, and between Nelson and Wellington, started in February this year.
The airline operates up to 244 flights a week on its regional network using surplus 50-seat Q300 Qantas Link aircraft.
Hrdlicka said the regional services had added 600,000 new seats a year.
While there were more aircraft available, she said Jetstar had no plans to expand its regional operation now.
"We're always really open to the world of possibilities but we're also very sensible. We'll grow with underlying demand in the market and build for the long term."
Last year Jetstar announced its domestic jet operation - which it set up in 2009 - was in profit in New Zealand. Hrdlicka would not comment on the profitability of the regional services but said it was ahead of its business plan.
The Jetstar-commissioned Infometrics report finds that average growth in total passenger numbers at each of the airline's four regional airports has grown as high as 27 per cent since the airline entered those markets.
The report noted that Statistics New Zealand found the price of domestic air travel fell by 9.8 per cent between December last year and September 2016. In comparison, prices more generally across the New Zealand economy, as measured by the Consumer Price Index, rose 0.8 per cent during the same period.
"Taking a longer horizon across the period since Jetstar entered the New Zealand market shows that domestic flight prices rose by an average of just 0.7 per cent per annum over the past seven and a half years. In comparison, the cost of road passenger transport climbed by an average of 2.3 per cent per annum over the same period," the report says.
Hrdlicka said that even in markets in which the airline was not operating prices had come down.
"That's good for Air New Zealand, that's good for Jetstar and the community," she said.
Infometrics senior economist Benje Patterson said the number of visitors grew in greater numbers than Jetstar's additional flights, suggesting that rather than simply cannibalising the Air New Zealand's passenger base, Jetstar has expanded the visitor market.
Domestic tourism is worth $20.2 billion annually to New Zealand - more than international tourism.
SHARE THIS QUOTE:
Jetstar is owned by Qantas and operates here, Australia, Singapore, Vietnam and Japan and of 34 million passengers carried, 20 million paid less than $100 to travel last year, Hrdlicka said.
Its regional operations here use five aircraft and on-time performance was improving. She said it had taken some time to digest the complexity of the expanded business in New Zealand.
Tourism Industry Aotearoa chief executive Chris Roberts said the increase in regional airline capacity and lower fares over the past year had helped to boost domestic tourism.
"Domestic tourism is worth $20.2 billion annually to New Zealand - more than international tourism. As the research shows, persuading more New Zealanders to use their discretionary dollars on a domestic travel experience results in more successful businesses," he said.
Projected annual GDP increases:
• $8.0m in Hawke's Bay;
• $5.2m in Taranaki;
•$9.3m in Manawatu-Whanganui, and,
&bull $17.1m in Nelson-Tasman.