Air New Zealand has vowed to slash its airfares in order to remain competitive with Jetstar.
Photo: RNZ
That was after Jetstar, the budget airline owned by Qantas, unveiled plans to start flying to four regional destinations later this year.
Air New Zealand's chief commercial and sales officer Cam Wallace said the national carrier would fight hard, and it would meet Jetstar's prices.
"We'll be meeting the market, so we'll be absolutely price competitive. We won't be in a scenario where our competitor is underpricing us," he said.
Forsyth Barr analyst Andy Bowley said in a research note that lower prices will have a "detrimental impact" on Air New Zealand's profits.
He estimated that Jetstar would be aiming for around $60 million in annual revenue from the new flights, which equated to about 4 percent of Air New Zealand's domestic revenue base.
"We expect the direct profit impact to be in the low single digits," he said.
However, Mr Wallace said all of Air New Zealand was in a good position to cut prices.
"There's a misconception in the market place that we have a profit pool that is largely centred around domestic and regional. That's actually not the case. We've got profitability right across our long-haul, our domestic, regional and trans-Tasman and Pacific island operations," he said.
Mr Wallace said Air New Zealand was probably in the best position the airline had ever been in to fight the new threat of lower prices from Jetstar.
Shares in Air New Zealand, which plummeted more than 9 per cent yesterday, recovered a little in early trading this morning.
