Known as Te Arikiroa, or Sanatorium Reserve, the area was used as the city dump prior to the development of the landfill, said Mrs Chadwick in a statement, calling it a "wasteland of significant cultural and economic value with important environmental aspects".
Mrs Chadwick made the announcement during Conservation Week.
"We have been reminded by many locals and iwi that this was once a pristine ecological site with wetlands and rich biodiversity prior to years of degradation. It is full of buried and dumped car bodies and other waste."
The Air New Zealand spokesperson said the project was aligned to the Air New Zealand sustainability framework.
"It will deliver environmental benefits, provide an ideal opportunity for community involvement and further enhance what is already a compelling proposition for tourists who visit Rotorua."
The spokesperson said the initiative was also supported by the Department of Conservation.
Mrs Chadwick said the initiative would be an exciting project that would inspire "us as a community".
"If we are truly to be known as a destination noted for our beautiful lakes and spectacular geothermal features we need to get moving together, and this is a great initiative."