Regional economic development minister Shane Jones said he was "immensely disappointed" at the withdrawal of the Jetstar airline from regional routes.
He's warned national carrier Air New Zealand not to use the opportunity to "gouge" regional air travellers.
"Air New Zealand has historically challenged anyone who creates a meaningful presence in the regions but it must not be tempted to ramp up gouging activity."
Finance Minister Grant Robertson, who is the Minister responsible for Air New Zealand which is 51 per cent owned by the Crown, said he is not able direct the company when it comes to ticket pricing.
But he said there is an expectation from New Zealanders that Air New Zealand keeps its prices fair.
"Clearly we will keep an eye on that but those decisions are theirs to make."
Although Jones acknowledged the Government could not interfere with operational matters, such as ticket pricing, "that does not mean Air NZ gets a free pass".
Jones said at one level Jetstar's withdrawal was capitalism at work.
"But as a retail politician I stand up for regional travellers and the pressures put on them."
Jones said he would be keeping an eye on Air New Zealand's prices and "won't sit idly by" if the airline took advantage.
Jones added he will be talking to the company about this issue.
He said he does not need Robertson's permission to talk to Air NZ – "if I want to talk to any corporate as the Provincial Champion, I'll be doing it 24/7."
However he was also confident the airline would want to maintain its brand equity and goodwill with regional travellers.
Asked about the issue, Commerce Minister Kris Faafoi said aviation is a "tough business at the moment".
He pointed to a recent move by Air New Zealand to cut some of its regional flights as well.
"I don't know if it's a competition issue… but there is always an opportunity for locally-based carriers to get in there as well."
Transport Minister Phil Twyford said the news was a "real disappointment" for regional New Zealand.
Twyford said there was no question that regional airline services increase the number of flights and has driven down prices in those areas.
"This is a bummer for regional New Zealand."
Jetstar was forced to drop some of its prices in response to Air NZ decreasing its ticket prices – Twyford said many in the regions will be wondering if Air NZ will maintain that kind of pricing.
Twyford said he has had a number of conversations with Jetstar over the last couple of months and the company told him of their plans to cut its regional services some months ago.
But Jetstar did not ask the Government for help, he said.
He said he was not seeking assurances from Air NZ that it would not hike its price.
"But I think that question will be on the mind of the public."
Jetstar decision to withdraw from the regions will come into effect from December 1.
Jetstar has been flying to Napier, Nelson, New Plymouth and Palmerston North for the past four years. The presence of the budget offshoot of Qantas has been critical in dragging down the cost of notoriously high fares on regional routes.
Given the uncertainty of turboprop services beyond November 30, Jetstar customers booked on regional services after November 30 will be offered options including a full refund. About 20,000 passengers were booked on Jetstar flights beyond that date.
The airline had lost $20 million flying the regional network last year.
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.
"November 30 - it's just before the December, New Year period, which sees a large movement of people," he said.
"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.
"It's certainly not good for people in the regions where Jetstar currently flies. And that's also going to potentially impact from a tourism point of view.
Thomas said there was going to be an impact from an inbound point of view because it was going to be harder to get to those regions.
"Jetstar carries a significant number of people so those customers are going to have to look for alternatives, in most cases of course will be Air New Zealand.
"What we do know is where there has been competition it's been good from a pricing point of view. But also from an availability point of view for travellers."
Gareth Evans, Jetstar's chief executive flew to Auckland to deliver the bad news and said his airline had given the regional routes a ''red hot'' go.
He said there was never a good time to announce scaling back services but had done it today to give time to consult with staff - most of who would be offered jobs in New Zealand - and passengers who could make alternative arrangements.
He said given the state of the market and the cost of running the regional operation, there were few prospects of any turnaround in the near future. The airline's jet operation here accounts for 83 per cent of its business.
Air NZ quickly pounced on their rival's news - offering discounted fares for affected Jetstar customers.