Jetstar's regional exit: Air New Zealand's plans to plug the gaps

Jetstar has been flying to Napier, Nelson, New Plymouth and Palmerston North for the past four years. Photo / File

Air New Zealand flight planners have started work on filling some of the gaps left by Jetstar's withdrawal from regional routes.

Jetstar's decision to quit turbo prop operations delivered a gift to Air New Zealand chief executive Christopher Luxon's successor.

While the departing head played down the impact of the move by the Qantas offshoot, the airline he officially left at midnight will benefit in the long term.

Air New Zealand shares leapt on the news around lunch time before closing up nearly 3 per cent up at $2.75.

One analyst said it would give the airline scope to increase yields on the routes where it no longer has competition from Jetstar after December 1.

About 20,000 passengers are booked on flights beyond that time and they would be offered full refunds and Air New Zealand is offering seat-only fares for the same route on the same day (schedule permitting) for no more than $50 each way.

Jetstar has been flying to Napier, Nelson, New Plymouth and Palmerston North for the past four years and its presence has been important for ulling down the cost of notoriously high fares on regional routes.

Regional economic development minister Shane Jones and Air New Zealand critic has warned the airline not to gouge regional travellers.

When asked about this Luxon said his airline had been offering ''outstanding'' value on regional services. He said it would ''manage our pricing exactly as we have.''

''I think what you're seeing is that there is an airline that is four times bigger than Air New Zealand that has struggled to make regional airline economics work. Everyone has a view on how regional airline economics work,'' said Luxon, whose successor will be known within the next month.

Air New Zealand has pledged to hold lead-in fares at current levels on the affected route for 12 months — assuming no steep fuel price increases.

Forsyth Barr analyst Andy Bowley said that would still give the airline scope to raise other fare types and he predicted yields would improve. Given the routes were a small part of the airline's regional operation, it wouldn't have a big affect on its bottom line.

''It's not a huge win but it would have been nice to have seen off one competitor.''

The routes are equivalent to around 5 per cent to 6 per cent of Air New Zealand's regional operation which is served by 51 aircraft.

Jetstar started with five Q300 planes that were not needed in Australia but as the going got tougher it scaled back flying and Luxon said it was only operating three planes recently.

''It's not completely unexected - Jetstar has had a light footpring here for a while.''

Jetstar CEO Gareth Evans announces the withdrawal of the airline's regional services in New Zealand. Photo / File

Jestar chief executive Gareth Evans was in Auckland yesterday to deliver the bad news. He said the airline last year lost $20 million on its regional routes which earned less than 20 per cent of revenue from its total operation here.

It is ''fully committed'' to its main trunk jet operation.

Evans said the New Zealand regional market was facing some headwinds, with softer demand and higher fuel costs - and the airline didn't see the outlook changing any time soon.

Air New Zealand said earlier this year that it too was facing softer domestic demand.

The airlines last Jetstar was now consulting 70 staff about its plans leading to a ''small number'' of services being cancelled as some team members impacted by the announcement elected not to operate in order ''to absorb and better understand the news.''

House of Travel commercial director Brent Thomas said Jetstar's decision was a big blow for regional New Zealand.

The move was incredibly poor timing leading up to the Christmas holiday period.

"It is a very difficult time for people to re-position themselves because of the lack of availability. And then, what is going to be the cost of that? So that's hard.''

Evans said there was never a good time for such an announcement and it was made yesterday to give passengers time to make alternative arrangements.

They can change their flight date at no charge to travel on an alternative, like-for-like flight before November 30 and change their booking at no charge to travel on any available Jetstar flight within New Zealand within three days of the original departure date.

For example an Auckland-Napier flight could be swapped for an Auckland-Queenstown flight after November 30.

Air New Zealand would investigate options to increase capacity on the affected routes, particularly at peak times of the day.

At the airline's annual shareholders' meeting in Auckland yesterday, Luxon was asked what it could do to help other third tier operators on the routes.

He said Air New Zealand was working towards interline agreements with smaller airlines including Air Chathams that would make booking and bag transfers easier.

Unions are disappointed.

E tū said it was supporting its members at Jetstar following yesterday's surprise announcement the company will cease its regional services, effective end of November.

E tū's head of aviation, Savage said the announcement, which came out of the blue, is disappointing and will mean job losses.

"All 20 of the company's regional crew are in the union and we are supporting all of them with advice and guidance at what for any worker is a very stressful time," says Savage.

He says the union will be working to help as many of the workers as possible find alternative, suitable jobs.

The airline has about 50 pilots, most of whom are members of the New Zealand Air Line Pilots' Association.

Association president Andrew Ridling said that NZALPA has already begun work with its Jetstar Regional pilots' council and Jetstar regional pilots.

It had been told by the company that it will look to redeploy Jetstar Regional pilots within the Qantas Group, either here in New Zealand or in Australia, and redundancy would be available to those pilots for whom redeployment was not acceptable.

"This really is an unsettling and uncertain time for Jetstar colleagues and friends and our staff and the wider NZALPA membership have come together to do all we can to support affected pilots and each other," said Ridling.