Air New Zealand’s regional routes could be in for a shake-up
Tuesday, 10 March 2026
Which routes would you least like to see cut? Have your say in the comments.
Air New Zealand appears to be foreshadowing a restructuring of its regional network to rein in rising fuel costs as a result of the war in Iran, industry commentators say.
Air New Zealand told the NZX on Tuesday morning that it had suspended its earnings guidance due to unprecedented volatility in global jet fuel markets following the recent escalation of conflict in the Middle East.
It had increased some fares in response to the rapidly rising cost of fuel and warned of further increases and that changes to services may also be needed.
Domestic fares had been increased $10 one way, short haul international fares were up $20 and a long haul economy fare would cost an extra $90.
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Craigs Investment Partners portfolio manager Mo Singh said Air New Zealand, along with other airlines, was now in cost containment mode, which would also include reducing the least economically beneficial services if possible.
“You'll pull your least economically beneficial services, if you can,” Singh said.
Aviation industry commentator Irene King said Air New Zealand’s underlying costs were already unsustainable, and had given rise to a comprehensive strategic review of the business that began in October. The spike in fuel prices was adding a bit more pain.
“This business is in the jaws of death - its revenue is rising slightly less than its costs, and that is not sustainable,” King said.
The rising cost of jet fuel could also be accelerating some of the decisions to come out of the review and offer an opportunity to accelerate some potential route changes, she said.
“I think it's going to be largely domestically focused, and the impact is likely to be felt on leisure routes which were marginally profitable at the best of times, and not underpinned by international connections,” she said.
More travellers were also opting to drive rather than fly, avoiding high airfares on some regional routes, she said.
“In terms of New Zealand domestic, it may well be an opportunity to do some real, significant structural changes, and develop some different partnerships here in New Zealand, ones that might be good for the longer term and positioning.”
Perhaps the “regeneration of Air New Zealand Link”, which was a brand that previously connected provincial centres to Auckland, Wellington and Christchurch under three regional airlines, she said.
Last year Air New Zealand entered into an interline partnership with Air Chathams, allowing customers to book a single domestic ticket that connected seamlessly to the wider Air New Zealand network.
King said traditionally airlines have responded to higher fuel costs by adding a levy on tickets. But Air New Zealand's problem was an issue of underlying dynamics that had not been addressed over a long period of time.
The crisis at Air New Zealand has been known for a long time “and for various reasons, they chose not to do anything other than fiddle around the margins”. As a result the review would have to delve much deeper to address unsustainable costs.
Higher fuel prices as a result of the war has further challenged the airline, and increasing fares could dampen demand.
A fuel levy on tickets could be applied and removed relatively quickly, she said. “But it won't do anything to the underlying dynamics of the company. That's really what that strategic review is about.”