AUCKLAND, New Zealand (Reuters) --National carrier Air New Zealand Ltd. announced it would cut average airfares on routes to the Pacific Islands by up to 50 percent as it unveiled the final stage of its revamp of short-haul services.
Air NZ, 82 percent owned by the New Zealand government, has already introduced a no-frills model on trans-Tasman and domestic flights, stimulating demand as it fends off competition from Virgin Blue and Australia's Qantas Airways.
"It's a defensive strategy," Andrew David, General Manager Pacific Airline, told Reuters. "It's about recognising that this is what the market needs going forward," he said.
The new Pacific Express service would see fares across both business and economy classes between New Zealand and Australia and the islands of Fiji, Samoa, Tonga and the Cook Islands reduce by up to 50 percent, the company said in a statement.
The cheapest one-day flight between Auckland and Fiji, excluding taxes and levies, would cost NZ$229 ($155) and NZ$289 ($195) to the Cook Islands.
"For the past two years we have been focused on progressively delivering simple, low-price fares on our short haul network to encourage more people to travel more often," said Air NZ's general manager New Zealand and Pacific Island sales Roger Poulton.
The introduction of a low-frills model with pared down food and service fuelled a 23 percent rise in domestic passengers in the first year and an 11 percent rise since it was introduced on trans-Tasman flights in October 2003.
Shares in Air New Zealand, which is appealing decisions by Australian and New Zealand regulators blocking a proposed alliance with Qantas, last traded up two cents at NZ$0.40.
David said direct revenue from the islands was small but that the contribution the area made to the Air NZ network as a whole was around NZ$100 million ($68 million) a year.
New Zealand's flagship carrier, rescued from near collapse by a NZ$885 million government rescue package in 2002, last week reported a 12 percent rise in first half profit of NZ$105 million but warned competition would constrain second half earnings.
The Pacific Islands rank in the top five most profitable markets for the company. Around 170,000 passengers leave New Zealand for the islands every year.
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