Air NZ: Fares to Drop Substantially

Flying is about to get substantially cheaper, the head of Air New Zealand says.

Lower fuel costs, an expanded fleet and increased competition from the likes of Jetstar would all pull down domestic and international prices, the airline's chief executive Christopher Luxon said.

Although he said prices were likely to drop "substantially", Mr Luxon said he was unable to put a figure on how much airfares could fall.

"The combination of fuel, supply and competition will ultimately determine pressure on pricing.

"Clearly, when you fly internationally fuel becomes a bigger variable than it does in domestic New Zealand. When you fly for 12 to 14 hours, fuel can be 25 to 30 per cent of your actual cost base."

The Government owns 53 per cent of Air New Zealand, which is a publicly listed company.

Air New Zealand had a successful year last year, making $474 million profit, before tax. It paid $89 million in dividends to the Government.

Because of its improved performance, the airline also gave all full-time staff who were not on individual bonuses $1400 "in reflection of the improved financial performance of the airline".

Mr Luxon said Jetstar's low fares could not last.

"A competitor has had very sharp promotional pricing -- 50 per cent service levels at the moment -- that's not going to be sustainable. That competitor is losing a truck load of money."

Full story at NZHerald.co.nz