Pacific Blue, a subsidiary of Virgin Blue, is pulling out of its New Zealand domestic operations as a result of significant losses, in an attempt to focus on routes with stronger revenue potential.

The heavy losses have been constant over the last 18 months and are deemed to be a result of three separate airlines all competing for travellers in a country with a population of just 4 million people.

When the airline launched three years ago, increased competition forced airfares down and tens of thousands of travellers were taking advantage of the low fares. Now, as a result of Pacific Blue’s decision, fares will increase and traveller numbers are set to fall. 

The Pacific Blue aircraft and staff will be deployed to service Trans-Tasman services to Australia and some routes to Asia. They are also set to replace long-haul V Australia routes to Fiji.

This change is said to be only the first in a series of network reviews which may include Pacific Blue flying to other destinations such as Tokyo, and increased flights between Australia and Phuket, Bali and three New Zealand Cities.

V Australia will also be increasing flights between Sydney and Los Angeles to include daily services, beginning in December, as well as another weekly service from Melbourne to Johannesburg, LA and Phuket.

Virgin Blue Chief Executive John Borghetti believes the new changes will maximise yield, increase aircraft utilisation and also provide a more attractive schedule for the business market, including better integration of Virgins international and domestic schedules.

The changes will take effect in October with Air New Zealand and Jetstar taking over passengers flights booked after 18 October.