The Civil Aviation Authority wants to charge Australian operators a safety levy because a shortfall in funds has led it to postpone safety projects.
Chief executive Irene King says the CAA is facing a shortfall of about $3.5 million partly because passenger numbers have fallen during the recession.
The funding gap is exacerbated by the replacement of Qantas on domestic routes by Jetstar.
Qantas had paid the levies but Jetstar, which operates under an Australian licence, does not pay the New Zealand CAA.
In total, the authority is forecasting a funding cut of 20%.
To make up the shortfall, the CAA wants to charge Australian operators a passenger safety levy, which could ultimately be passed on to customers.
The levy would be $NZ1.66 for domestic passengers and 83 cents for international customers.
Ms King says the government should have thought ahead and changed the law a few months ago so Jetstar would also have to pay the full amount.
"If we're in another country we pay the levy, there's no rebate," she says.
"There's no question that Jetstar should pay, and in our view they should be paying the full amount, just like any other carrier operating on domestic services."
Jetstar corporate relations manager Simon Westerway says the airline operates completely within the laws and rules of the land and in accordance with Australia's Civil Aviation Safety Authority requirements.
He says the airline will be taking part in a consultative process with the CAA and does not wish to participate in a public debate on the matter.
Passenger safety levies are the CAA's main source of income.
The agency is asking the aviation industry for feedback on its proposal, which would take effect from November.