When the Sir Richard Branson-backed airline entered the domestic market in mid- November it boasted $39 introductory fares – which were quickly snapped up.
The new year-round "mini- fares" were aimed to stimulate "impulse" short-stay leisure travellers, the airline said yesterday. They include a $49 one-way Christchurch-Wellington fare, a $59 Auckland- Wellington fare and a $69 Christchurch-Auckland fare.
Pacific Blue commercial general manager Adrian Hamilton-Manns said using 180-seat planes, rather than 120-seat aircraft used by rivals, would further stimulate competitive pressures. "I'm sure our competitors will match our prices but they won't match the number of seats that we have available … it's a volume equation."
Rival Air New Zealand yesterday refused to say whether it would match the lower fares.
Air NZ has already said it will cut some fares up to 27 per cent on nearly 40 regional routes from February 23.
Pacific Blue said inflation figures released last month showed that domestic air fares had fallen nearly 5% since it entered the market.
An Australian aviation analyst said a price war leading to volume growth could be a winner for all the domestic airlines, including Qantas New Zealand.
Hamilton-Manns said the "midweek mini-fares" would be available from Tuesday for travel on selected flights on Tuesdays, Wednesdays and perhaps Thursdays.
There could be some days where a flight's capacity was already sold out, and the "mini- fare" would not be available. "(But) we hope as many people buy them as possible … there's a significant level of availability of these fares."
The airline's fare types ranged from the "Blue Saver" from as low as $59 a seat, to flexible business tickets priced up to $240.
The Christchurch-based airline already flies on routes between the Garden City, Wellington and Auckland and is likely to announce new regional routes before March 31.
Figures from Wellington Airport showed that domestic passenger numbers grew by nearly 30% in January 2008 while Christchurch Airport reported that passenger volumes for December rose by 11%.
Centre for Asia Pacific Aviation's executive chairman, Peter Harbison said despite higher fuel prices the low-price high- volume model had worked well in most markets.
Pacific Blue would thrive from volume growth, given that much of its earnings were made from inflight sales, including food and drinks and tie-ins to hotels and rental car firms, he said.
"Increasingly, Pacific Blue is going after the associated expenditures, so (they) can start mopping up a bit of cash from other sources as well," Harbison said.
The airline was likely cutting into rivals' profits, he added.
"It's a small market. Pacific Blue is stimulating some growth, but there's obviously a bit of diversion as well."