Air NZ shares sink on prospect of more Jetstar rivalry

AIR New Zealand shares sank to their lowest level since November last year ahead of an announcement from Qantas Airways' budget subsidiary Jetstar that it plans to expand its local offering.

The national carrier's shares fell as low as $2.35 and were recently down 10 percent to $2.38 ahead of a scheduled 2pm announcement by Jetstar over the expansion to its domestic New Zealand operations.

The announcement will feature statements from Qantas chief executive Alan Joyce and New Zealand Prime Minister John Key, who also holds the tourism portfolio.

"Any increased competition in the lucrative domestic market will have investors worried," said Grant Williamson, a director at Hamilton Hindin Greene in Christchurch.

"They might be getting a little ahead of themselves and should wait for the announcement."

Air New Zealand reported a 20 per cent boost in annual earnings in the six months ended December 31, benefiting from cheaper fuel costs as global oil prices dropped.

The national carrier holds about 80 per cent of the domestic market, and recently came under fire after it signalled plans to scale back local routes that weren't profitable enough.

At the same time, Air New Zealand has been expanding its international coverage with several codesharing agreements, most recently announcing a tie-up with Air India.

Jetstar currently runs five domestic routes in New Zealand, servicing Auckland, Wellington, Christchurch, Dunedin and Queenstown.