Air New Zealand is ratcheting up competition in the regions, announcing it will spend more than half a billion dollars on new planes just three weeks before rival Jetstar starts its regional servcies.

The 15 new ATR72-600 planes Air New Zealand has ordered will replace 11 older aircraft and will fly on existing routes.

Air New Zealand chief executive Christopher Luxon said the addition of 600,000 more seats on regional services would lead to lower fares.

As part of last year's restructuring of its regional operation - which led to pulling out of Kaitaia, Whakatane and Westport and closing Eagle Airways - has led to bigger planes being used on the network and fares which he said were 15 per cent lower.


Bigger planes were cheaper to run per seat and this allowed the airline flexibility to cut fares.

"In some places we'll be putting in a much larger aircraft than there is demand for and we'll have to work with the community to build and create demand through different events and obviously have to lower pricing to fill those seats," said Luxon.

The additional 15 new aircraft are worth $568 million at list prices and will begin arriving from November next year through to 2020.

The turbo-prop planes can carry 68 passengers.

Luxon said it was a sign of confidence the airline had in regional New Zealand.

There were no plans to restore services to the towns the airline pulled out of early this year but routes were always under review.

"We look at new routes all the time we're often in conversations with different regions."

He said the announcement was not in response to Jetstar's regional operation and Air New Zealand would not target routes flown by the Qantas subsidiary. It would fly where there was most demand.

Jetstar, which today had no comment on Air New Zealand's announcement, will start flying from main centres to Nelson and Napier on December 1 before expanding to New Plymouth and Palmerston North next year.

Local government New Zealand president Lawrence Yule said the Air New Zealand announcement was great news for smaller cities and towns.\

"The regions want good service, cheaper fares and importantly they've wanted competition and in some parts they've got this. For the conusmer it's a good thing," he said.

In addition to ATR aircraft, Air New Zealand also currently operates ten 19-seat Beech 1900D - which it is phasing out - and 23 50-seat Bombardier Q300 aircraft types.