Budget airline Jetstar is fuelling growing competition on domestic routes with extra flights and aggressive discounting, aiming to capture close to a third of the market.
In a challenge to Air New Zealand, the Australian airline is increasing services between Auckland, Wellington and Christchurch adding 600,000 seats a year. Sale fares between Auckland and Wellington dropped as low as $35 yesterday.
Air New Zealand has also increased domestic flying this year with an extra 320,000 domestic seats a year and a new round of discounting to fill them.
Jetstar announced yesterday services between Queenstown and Sydney and Melbourne would also be increased to cater for growing demand from Australian tourists.
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However, the airline has axed its Christchurch to Queenstown flights because of a slump in demand. Jetstar will also reduce Christchurch services to the Gold Coast and Melbourne by two flights a week. The airline's chief executive for Australia and New Zealand, David Hall, said it could be a year before demand for Christchurch services recovered to pre-quake levels.
Jetstar has about 20 per cent of the domestic market - one of the most lucrative parts of Air New Zealand's business - and with the addition of a ninth aircraft will take that up to about 24 per cent. Mr Hall said a 30 per cent market share target was realistic for the airline, a Qantas subsidiary with operations in Australia and Asia.
"When you're competing against a strong government-backed incumbent carrier I think 30 per cent is a good aspiration. We'll get there as soon as it's economically rational."
The airline would add 50 staff to the 500 already based here by putting on 36 extra return flights. It has been flying domestic routes since 2009 and last year carried 1.6 million passengers.
More large, fuel-efficient Airbus A320 aircraft coming into service are helping both airlines boost seat numbers and they're offering lower fares to fill them.
Air New Zealand had no comment on Jetstar's expansion yesterday, but when it announced fare reductions in July it said it had sold more than one million fares below $100 in the previous year.