Air NZ airfares set to fall as fuel bill drops
9:30AM Wednesday Aug 05, 2009

Air New Zealand's fares should drop next year as its fuel bill falls and competition pushes it to pass on savings. Photo / Paul Estcourt

Travellers will get the benefit of Air New Zealand's shrinking fuel costs next year as competition in the Australasian market forces the national carrier to pass on any savings.

The airline's fuel hedge position will slash costs in 2010 by US$335 million, or NZ$560 million, based on an average price for West Texas intermediate oil of US$72 per barrel at an exchange rate of 60 US cents, according to a Morningstar Research report.

Still, the savings aren't expected to spill into the company's bottom line, with "competitive pressures on the short haul route" likely to be passed on as the carrier tries to stoke demand for airfares.

The local carrier pounced on poor service by Jetstar, the low-fare unit of Qantas, which suffered a series of problems with its check-in system expanded its local flight schedule in a bid to ramp up domestic competition last month. The local market is rounded out by Pacific Blue, the cut-price subsidiary of Virgin Blue.

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