Chch Airport says Air NZ canceled route it will weigh on the South Island economy

Christchurch International Airport says Air New Zealand decision to cancel the city's Tokyo seasonal route will hit the South Island economy.

The national carrier today canned its seasonal Tokyo to Christchurch services that runs through the Northern Hemisphere winter, saying it will instead focus on its year-round Tokyo to Auckland route. Chief executive of the country's second largest airport Malcolm John says it was disappointing to see "profitable air services leave the South Island" and will result in a drop off of visitors which will flow through to the region's economy.

"This decision will have an undeniable impact on the economy of the South Island," Johns said in a statement. "The Japanese market has always been important to the South Island and is growing at the moment, so the timing of this is a major blow for an industry that's still on a recovery path after the earthquakes."

In cancelling the route, Air NZ's chief sales and commercial officer Cam Wallace said it accounted for 0.3 percent of total seats into the city and research in Japan found there was no real preference to fly into Christchurch over Auckland. The airline intends to grow seats into Christchurch via a mix of domestic and trans-Tasman flights and it said that it would increase the number of seats by 250,000 in the 2016 financial year.

The national carrier's abandonment of the Tokyo to Christchurch route comes after it announced in November it was ditching seven regional routes, as the cost of maintaining its 19-seat aircraft fleet has cost more than $1 million a month over the past two years.

Last year, the Commerce Commission found Christchurch Airport's targeted returns over the next two decades were too high and its pricing lacked transparency, with its proposed pricing for 2012 to 2032 targeting a return of 8.9 percent, above the 7.6 percent-to-8.5 percent range the regulator deems acceptable.

There is a tension between airlines and airports, which both have called on the other to be further regulated. Airlines, biggest customers of airports, say light-handed regulation allows airports to extract excessive profits, while the New Zealand Airports Association has lobbied the commission to regulate Air NZ's regional air fares, where the national carrier has an effective monopoly.

Last year Air NZ reported a 45 percent uplift in annual profit to $262 million, its third consecutive year of earnings growth.

Shares of the airline rose 0.2 percent to $2.715 and have gained 9.7 percent since the start of the year.