KEY POINTS:
Air New Zealand yesterday dropped the price of its domestic fares by up to 26 per cent in an attempt to lure more people to travel locally.
And there is the prospect that fares will drop even further if demand for domestic travel as a result is strong.
The national carrier matched the lowest fares by Qantas on the main trunk routes and took the price of flying to many provincial centres under $100 to help to fill new, larger aircraft plying these routes.
From February 24, it will be possible to fly from Auckland to Wellington one-way for $89 and from Auckland to Christchurch for $99, a 23 per cent and 18 per cent reduction on the present lowest prices respectively.
Unlike the odd sale, these prices will be permanent. Between 8 per cent and 10 per cent of tickets will be at the new lowest price, which applies only to online bookings. The new tickets go on sale on Wednesday.
Aucklanders will be able to fly direct to Nelson for $99, a 23 per cent reduction on $128 one-way specials, or visit the Marlborough wineries for $238 on a return trip to Blenheim. The biggest discount of 26 per cent is on the Nelson-Palmerston North route.
Air NZ chief executive Rob Fyfe said the airline was cutting prices to develop its business and not in response to lower fuel prices and greater competition on domestic routes.
However, Pacific Blue owner Sir Richard Branson said while visiting New Zealand this week that his airline was likely to set up a domestic service in the next year.
Qantas regional general manager Grant Lilly refused to say what, if anything, the Australian airline would do to match or undercut Air NZ's cheap fares, other than to say the company would "remain competitive at all times in the New Zealand market".
Qantas flies domestic routes in and out of Auckland, Wellington, Christchurch, Rotorua and Queenstown.
Mr Fyfe said New Zealand had a relatively static population and the best way to increase business was to get people to use air travel as opposed to other forms of transport.
He said if the cheap fares created demand for more services, there could be more price reductions.
The airline has also announced a reduction in the most expensive fares - typically bought at short notice - of about 4 per cent, or about $20. A small number of flexi-save fares on main trunk routes will go up by about 3 per cent, or about $15.
Travel agents welcomed the new cheap fares.
House of Travel retail director Brent Thomas said it would be a boon for travellers and would put pressure on Qantas.
Flight Centre strategic development manager Chris Hunter said the fares meant many people could now look to fly two to three times a year as opposed to just once.
Paul Davis, the chief executive of Nelson's tourism body, Latitude Nelson, said the $99 one-way price from Auckland to Nelson was a good deal.
"The Auckland leisure market for Nelson is one that offers us huge potential and this is a move that will help us tap that potential."
Mr Fyfe said the airline was working on new fares for the Tasman and Pacific Island markets, as well as long-haul routes.
Flying Start
* Air NZ's domestic airfares have been cut by up to 26 per cent.
* Many fares to provincial centres will be under $100 from February 24.
* Auckland-Wellington one way will be $89.
* Auckland-Christchurch will be $99.
* Auckland-Nelson will be $99.
* Auckland-Blenheim will be $238 return.
* The biggest discount of 26 per cent is on the Nelson-Palmerston North route.