Air NZ to slash entry level airfares by up to half on up to 40 domestic routes

Air New Zealand is cutting entry level airfares by up to 50 per cent on about 40 domestic routes in what will be the airline's biggest pricing shake-up in 15 years.

Stuff understands the national carrier has been working on ways to stimulate the domestic market, especially on regional routes, since it announced a profit downgrade last month.

The reductions are set to be rolled out in the next 24 hours, with the airline preparing to inform travel agents, on Monday.

Such drastic changes have not been made to Air New Zealand's domestic pricing structure since 2002 when it remodelled its business to offer substantially lower fares, simplified booking rules, introduced a focus on internet sales and ease of booking.

Dubbed "express class", the redesign did away with business class on its domestic routes in order to make way for more seats. It coincided with a fleet renewal programme which included an order for 14 new Airbus A320s.

Within two years of the changes Air New Zealand passenger numbers into Wellington increased 34 per cent.

Now the airline is taking delivery a new order of 13 Airbus A321neo aircraft for its trans-Tasman and Pacific Island routes. A further seven A321neo have been ordered for the airline's domestic network, with delivery expected between 2020 and 2024.

Air New Zealand chief marketing and customer officer Mike Tod would not confirm the latest pricing changes but said the airline was looking at "positive changes" for domestic travellers.

These also included improvements to the airline's digital, ground and in-flight experience, Tod said.

Air New Zealand is currently reviewing its network, aircraft fleet and costs.

Tod would not comment on how that review was progressing.

It is not clear what routes will have pricing changes.

New Plymouth mayor Neil Holdom said he met with Air New Zealand representatives last week and they indicated there would be "significant discounts" on flights in and out New Plymouth particularly around midday.

He said he asked if airfares would be 10 to 20 per cent cheaper and Air New Zealand said it could be even more than that.

"What is clear is they've got some capacity during those midday flights," Holdom said.

"They're looking to target holiday travellers."

Aviation commentator Irene King said Air New Zealand needed to do something to improve its domestic performance, which was a vital component of its business.

"Exercising control over that market is so fundamental to their whole profitability equation," King said.

"They have to be able to compete with Jetstar."

Air New Zealand not only needed to reduce its airfares but also simplify them, she said.

She said the domestic market had softened and Air New Zealand was reacting to that.

"It's about getting more people in New Zealand to travel at off peak times so that they can fill up the aircraft.

"I understand some of the aircraft have been going out with pretty light loads."

Reduced airfares would go some way in turning around a perception held by many New Zealanders that the airline had been gouging the regions, she said.

But cheaper airfares would not result in the end of "pretty horrific" pricing at peak times such as Friday mornings and evenings, she said.

"There will be cheaper pricing out there but they will still make the money where the demand is."

House of Travel commercial director Brent Thomas said he and his colleagues had not been briefed by Air New Zealand and until they had more information it was difficult to speculate how the changes might affect customers.

"Until we see the final detail we have to be cautious about how it affects the average traveller."

He said if one traveller benefited from cheaper airfares it meant that another passenger in a different situation may have to pay more.

"Overall the impact may well be neutral."

He said he did not expect to see "wholesale changes" across Air New Zealand's pricing structure.