Air New Zealand has cancelled hordes of domestic flights from now until June despite regional travel being allowed when the country moves to level 2.

The airline announced today it will operate to most domestic airports at level 2 but at just about 20 per cent of its usual capacity, and warns fares will be higher.

But ahead of the announcement passengers on a range of flights received emails today stating their bookings across May and June had been cancelled.

The Herald is aware of cancellations on the Wellington to Queenstown route in late June, along with Auckland to Queenstown for a range of dates across May and June.

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A customer on a flight booked from Auckland to Queenstown at the end of June told the Herald she understood the reasoning for it, but worried about the impacts it could have on the tourism-dependent economy there.

It comes as Air NZ slashed 300 pilot jobs, and those remaining face pay cuts of 30 per cent.

Alert level 2 will see the return of flights to Queenstown, Invercargill and Blenheim in the South Island and Rotorua, Gisborne, Palmerston North, New Plymouth, Hamilton, Whangarei and Kerikeri in the north.

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The airline is flying a bare bones network to support essential service travel between Auckland and Christchurch, Wellington, Tauranga and Napier, as well as between Wellington-Christchurch, Wellington-Nelson and Christchurch-Dunedin.

Chief executive Greg Foran said the airline had been keen to start ramping up domestic air services as soon as possible.

''But the ramp up to higher frequencies will be a slow journey and even when we come out of alert level 1, all of our domestic destinations will get fewer flights and reduced frequencies,'' he said.

''This is the harsh reality of closed international borders and a depressed domestic economy, with more Kiwis in unemployment and people watching what they spend."

Foran said that the airline would not be able to offer its normal cheapest lead-in fares.

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"One-metre social distancing means we can only sell just under 50 per cent of seats on a turboprop aircraft and just 65 per cent on an A320. On that basis, to ensure we cover our operating costs, we won't be able to offer our lowest lead-in fares until social distancing measures are removed."

Covid19.govt.nz: The Government's official Covid-19 advisory website

Finance Minister Grant Robertson has announced a loan of up to $900 million to bail out Air New Zealand. Video / Derek Cheng

The airline will operate the following domestic routes at alert level 2:

Auckland flights will go to and from:
Christchurch, Gisborne, Kerikeri, Napier, Nelson, New Plymouth, Palmerston North, Tauranga, Wellington, Whangarei, Queenstown
Christchurch to and from
Dunedin, Invercargill, Nelson, Palmerston North, Wellington, Queenstown
Wellington to and from
Blenheim, Gisborne, Hamilton, Napier, Nelson, New Plymouth, Rotorua, Tauranga

Additional routes and frequencies will be reintroduced as demand permits and once it is clear exactly when the country will be moving to alert level 2.

Air New Zealand will restart services to Taupo, Hokitika and Timaru as demand allows.

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It asks customers with existing bookings who don't intend to travel to cancel bookings and to receive a credit via its website or their booking agent to free up seats to allow others to fly.

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Foran said Air New Zealand will be working closely with Tourism New Zealand, regional tourism organisations, iwi partners and Government agencies like the Department of Conservation to encourage Kiwis to see more of the nation.

"We live in the best country on Earth and on our doorstep have world class accommodation, attractions and activities. We'll be strongly encouraging Kiwis to support our tourism sector and to visit friends and family."

A decision on when to move to level 2 will be made on Monday.