Air NZ's shares down 10% on rival's bombshell

Air NZ's shares have plunged on Jetstar's announcement it will set up its own regional air services by the end of the year.   Nevil Gibson discusses his latest Editor's Insight on NBR Radio and on demand on MyNBR Radio.

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Air New Zealand’s [NZX: AIR] shares have plunged almost 10% on Jetstar’s announcement it will set up its own regional air services by the end of the year.

The new services will be to at least four regional destinations initially, with some of those under consideration being Hamilton, Rotorua, New Plymouth, Napier and Palmerston North in the North Island and Nelson and Invercargill in the South Island.

They will be operated by a fleet of five 50-seat Bombardier Q300 turbo-prop aircraft previously run by QantasLink in Australia. The new venture is expected to create at least 100 new jobs for pilots, cabin crew and ground staff. Jetstar currently has a staff of 400 in New Zealand to run its main-trunk jet services.

Air NZ investors were clearly not impressed with today’s announcement, with the stock falling 9.43% to $2.40.

Jetstar says its regional fares will go on sale in September, with first flights taking off in early December.

Qantas chief executive Alan Joyce says its Jetstar subsidiary is profitable “and now is the time to grow it.”

Air NZ has been criticised heavily in the past for its expensive airfares to domestic regions, where it had an effective monopoly.

In November it announced cuts to its regional network, with services no longer operating to Kaitaia, Whakatane and Westport, and its subsidiary airline Eagle Airways shut down.

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