The detour that shouldn’t make sense
Book a return flight from Hamilton to Bali for $885. Then check the same trip from Wellington: $1,023. Christchurch, at the bottom of the South Island, comes in at $889. Auckland, the country’s primary international gateway, is $906.
This is not a glitch. It is what happens when airlines price each route segment independently based on local competition, seat fill rates, and algorithmic yield management rather than anything resembling distance or logic. The Wellington leg costs more because the trans-Tasman connection from Wellington runs on a thin, less-competitive route priced at a premium. Route through a competitive hub and the total comes down.
For leisure travellers, this is a fun hack. For businesses trying to manage travel procurement rationally, it is a structural problem.
How the algorithm decides what you pay
Air New Zealand runs 15 price points on domestic routes. A single Auckland-Napier fare can range from $59 to $356 depending on timing. With roughly 150,000 flights on sale at any given time, computer systems set fare ranges dynamically, with just six revenue management analysts available to override them.
Consumer NZ spokesperson Vanessa Pratley has noted that dynamic pricing algorithms can increase prices by up to four times, and that “consumers don’t understand how algorithms work.” The information asymmetry is total: the airline knows exactly what its system is doing, and the buyer does not.
The result is fares that move in ways no procurement team can model. Domestic air transport prices rose 7.4% in a single month between January and February 2024, while international air transport prices fell 1.7% over the same period. Two markets, opposite directions, same airline.
Competition explains the gap better than costs do
Consumer NZ tracked 7,344 flights over 34 weeks and found Qantas was cheaper than Air New Zealand 94% of the time on trans-Tasman routes, averaging 16.7% cheaper across all routes and lead-in times.
The school holiday numbers are more damning. Air New Zealand’s Christchurch-Brisbane fare surged 150.7% in four weeks during October school holidays. Qantas on the same route increased 1.4%. A family of four flying Air NZ instead of Qantas on the same day paid $4,637 more.
Domestically, Air NZ’s pricing premium over Jetstar can reach six times on shared routes. The Commerce Commission has received 448 inquiries about Air NZ pricing over three years. Consumer NZ chief executive Jon Duffy has asked the obvious question: “Why is Qantas able to keep its pricing relatively stable?”
The cost pressures are real but they don’t explain the volatility
Air New Zealand is not operating in easy conditions. Domestic fares are up 20-30% above pre-Covid levels, but costs are up 30%, meaning the airline is not fully recovering its cost increases. CEO Nikhil Ravishankar has pointed to climbing airport charges as a key driver. Airways Corporation is increasing commercial airline pricing by an average 17.7% over FY26-28. Domestic flight volumes sit at only 90% of 2019 levels, spreading fixed costs across fewer seats.
These are legitimate pressures. But they explain why average fares are higher. They do not explain why the same route can vary sixfold between carriers, why school holiday surges hit 150% on one airline and 1.4% on another, or why flying backwards through Hamilton gets you to Bali cheaper than flying forward from Wellington. That is algorithmic pricing operating in a market with insufficient competition.
Forsyth Barr analyst Andy Bowley has warned that Air New Zealand will remain challenged “until at least mid-2027”, suggesting these distortions are not temporary.
What businesses should actually do about it
The practical takeaway is uncomfortable: rational procurement of airfares in New Zealand is now extremely difficult. Firms with travel policies that default to direct routes are potentially overpaying systematically. Businesses booking reactively around school holidays or major events face the sharpest penalties, with domestic fares spiking 10.8% in a single month when major concerts hit the country.
The smart moves are unglamorous: compare carriers obsessively on trans-Tasman routes, book early, check indirect routings, and build the volatility into budgets rather than pretending fares are predictable. Consumer NZ has called for a Commerce Commission market study, arguing New Zealand has “one of the least competitive aviation sectors in the world”.
Until that competition arrives, the system rewards the traveller who games it and punishes the one who trusts it. For businesses, that is not a pricing model. It is a tax on simplicity.
Sources
- Cheapies: Bali Return fares from NZ cities
- NZ Herald: Air NZ domestic fares are up more than 20% – how the airline sets them
- RNZ: Big gigs, big prices – Stats show impact of dynamic pricing on flight costs
- Stats NZ: Selected price indexes February 2024
- Consumer NZ: Air New Zealand consistently more expensive than trans-Tasman competition
- RNZ: Consumer NZ calls for inquiry into Air NZ pricing model
- BusinessDesk: Air NZ lands blame for high domestic airfare prices on climbing airport charges
- Airways Corporation: Pricing for 2026-2028 consultation response and decision document
- NZ Herald: What Air New Zealand’s flight cuts and changes tell us