Air New Zealand will cut services from three towns and shut down subsidiary Eagle Airways as part of a revamp of its regional services.

The airline is investing an additional $100 million in planes for more popular routes but from April the airline will suspend services: Kaitaia - Auckland; Whakatane - Auckland; Whangarei - Wellington; Taupo - Wellington; Westport - Wellington and Palmerston North - Nelson. Hamilton - Auckland will also be suspended from February 2016.

As Kaitaia, Whakatane and Westport are single route ports, the suspension of these services means Air New Zealand will no longer operate to these destinations from the dates specified.

The 19 seat aircraft operated by Eagle is the smallest in the Air New Zealand fleet but had the highest cost per seat to operate because the fixed costs of operation are distributed across fewer passengers.

"This has led to Eagle Airways, which operates the 19 seat fleet, losing $1 million per month for the past two years, or the equivalent of $26 per one way passenger journey," said Air New Zealand chief executive Christopher Luxon.

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"While today's news will be disappointing for some communities, Air New Zealand remains resolutely committed to regional New Zealand and the changes announced today will set up our regional business model for future sustainable success."

He said he also acknowledged the news was disappointing for Eagle Airways' staff.
"Eagle Airways management, staff and unions will now begin a process of determining the future of the business. The airline has 232 employees and there are good redeployment opportunities across a rapidly growing Air New Zealand group."

Air New Zealand shares closed up slightly on the NZX after the announcement. They finished up 1.5c at $2.095.

The airline is also introducing a range of new regional fares it says will cut the cost of travel by an average of 15 per cent.

The Engineering Printing and Manufacturing Union said more than 30 aircraft engineers in Hamilton may lose their jobs following Air New Zealand's announcement today that it plans to close subsidiary Eagle Air.

Eagle Air is a regional airline which flies under Air New Zealand's Link brand, servicing New Zealand's rural towns with Beech 1900 Aircraft. The Beech 1900 aircraft is coming to the end of its life and will be replaced with bigger aircraft, putting at risk the jobs of heavy maintenance engineers in Hamilton.

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"These engineers are working in highly-skilled, well-paid jobs which create a lot of value for the local economy," says Strachan Crang, EPMU assistant director of Organising. "They'll find it very difficult to get similar work in the Waikato and many may have to relocate."

Eagle Air will cease operations in August 2016, the union said. There may be provision for a smaller maintenance facility to remain in Hamilton, working on other Air NZ aircraft.

"Fortunately there's a long lead-in time so we'll be able to make sure all our members can move to other jobs in the wider Air New Zealand group if that's what they choose," said Crang.

"Eagle Air services small airports in the regions. If those routes aren't picked up by Air New Zealand, it could have a serious impact on those communities."