Air New Zealand is promising more discounted fares as it adds hundreds of thousands of extra seats to its network where travel agents say price competition is already fierce.
The airline says it will add 12 per cent capacity across its domestic and international operations during the next six months and will drop prices to help fill them.
At its half-year profit briefing, chief executive Christopher Luxon said the benefit of lower fuel prices would give the airline more leeway to drop prices but the biggest influence on fares would be extra capacity.
"That is going to flood the market with seats and some good deals as we try to fill those aircraft up."
While the overhaul of Air New Zealand's regional operations meant it was pulling out of three provincial centres, new larger planes meant capacity was increasing sharply across that network. The airline has previously said the introduction of more efficient aircraft and a schedule revamp could lead to fare reductions of 15 per cent across the network.
Mr Luxon said his airline would respond to greater competition from international airlines which were also benefiting from fuel prices, half what they were around eight months ago.
Air New Zealand spent $569 million on fuel in the past six months - almost 25 per cent of its costs - and the drop in the oil price added up to savings of $22 million during that time. It stands to benefit by almost four times that over the second half of the financial year but because of hedging arrangements the airline doesn't get the full benefit of fuel savings until next year when it could save $249 million over 12 months.
Flight Centre general manager of product Simon McKearney said competition was already intense on most international routes Air NZ flew.
"There used to be really good tactical deals but what we're seeing day in and day out is that fares have dropped to really good levels."
The strong competition from the Qantas-Emirates alliance on the Tasman meant fares on the route were now regularly about $150 one-way.
McKearney said his firm was having to renew promotional campaigns two or three times a week as deals were coming out so frequently.
Air NZ fares to the US west coast were on special at $1299, $500 less than those booked months ahead.
Travel's golden era
• Best price of a return flight from Auckland to Europe:
• 1947: $1170 (85 weeks' pay of average worker)
• 1980: $1800 (six weeks' pay)
• 2014: $1500 (1 and half weeks' pay)
Source: Flight Centre