Travellers will soon be able to fly between Auckland and Wellington on late-night flights for $29.
Air New Zealand's new "Night Rider" service will start on November 5, undercutting its budget competitor Jetstar and offering regular low prices in contrast to the airline's current Grabaseat fares.
Jetstar said its own low fares were behind the cheap prices, and a commentator says the move is part of a strategy by Air New Zealand to keep planes full.
The airline is facing increased competition from Jetstar, which will next month start flying the main trunk with an extra aircraft.
Air NZ chief executive Rob Fyfe made the fare-cut announcement yesterday, saying it was the first time an airline had offered fares for $29 for an entire plane, and he expected the new flights to be a hit with travellers.
"[People] will now be able to fly between Auckland and Wellington for less than the cost of a third of a tank of petrol for the average family car."
The cheap flights will take off from both cities at 10 each night from Sunday to Friday. On Saturday, they will leave Auckland at 9pm and return from Wellington at 10.30pm.
Jetstar yesterday welcomed the competition.
Spokesman Phil Boeyen said: "We started flying domestically in New Zealand three years ago and since then, we've seen others react and try to match our low fares."
The Night Rider flights will add about 100,000 additional seats a year. Jetstar has offered $35 sale fares.
Air NZ said this year that it had sold one million fares over 12 months at below $100 each.
Other North Island transport options are expected to be affected by the cheap fares.
Nakedbus chief executive Hamish Nuttall said the move would provide healthy competition across the board.
The company has some of the cheapest bus rides on the market, with prices ranging from $1 plus booking fee up to $33.99.
Positively Wellington Tourism chief executive David Perks said the capital would benefit from the fares.
"Our airport's so close to the city that you could have a fantastic dinner at one of our great restaurants and still be on the $29 fare home back to Auckland at the end of the night.
"It just gives people flexibility - the business traveller and the leisure traveller. There are people who will say, 'Hey, there's this good restaurant in Wellington, we'd love to have you down for dinner'. And $29, it's probably cheaper than a taxi fare."
The head of private wealth research at Forsyth Barr, Rob Mercer, said the move was part of Air New Zealand's strategy to keep planes full even if seats were being sold cheaply.
"Philosophically, the company has changed over the last three or four years to the view that it is better to sell every seat than try to sell 70 per cent of seats at a higher price."
Mr Mercer said the Air New Zealand move was aimed at "price-sensitive" passengers who now had certainty on when they could travel rather than waiting for cheap Grabaseat fares, which were hard to plan around.
"At the moment, Grabaseat is a bit random. It comes when you're not ready to make a decision. But now you'll be able to plan around it."
However, the introduction of the Night Rider service could mean the airline would have fewer discounted seats earlier in the evening when there is greater demand from commuters travelling between Auckland and Wellington.
Mr Mercer said there were already a "decent" number of fares being sold for as low as $1.
"They're rejigging it, rebranding it and putting it into a different service, which has got to be good."
- Additional reporting: Grant Bradley