Pacific Blue says it is losing millions of dollars flying domestically in New Zealand and will stop servicing the routes to focus on more lucrative ones elsewhere.
The airline announced on Monday it will stop the New Zealand routes from 18 October and increase flights to Australia, south-east Asia and the Pacific Islands.
People holding forward bookings from 18 October onwards will be provided with alternatives and refund options.
The Richard Branson-owned airline began domestic services in New Zealand in late 2007. At the time, it made a commitment to stay in the market despite predicting it would not be profitable at first.
However, Pacific Blue chief executive Mark Pitt told Checkpoint on Monday several factors - including the low fares the airline marketed itself on - are behind the decision to stop flying within New Zealand.
Mr Pitt says the airline's low prices became unsustainable once the competition began following suit, among other challenges.
Pacific Blue came into the market when fuel prices were at the highest, he says. This was shortly followed by the global financial crisis and recession, as well as a "truckload" of competition coming into the market.
Monday's announcement is the first phase of a network review being carried out by Pacific Blue.
The decision leaves Air New Zealand and Qantas-linked JetStar flying the main domestic routes.
More NZ jobs to be created
Pacific Blue says another 100 jobs will be created in New Zealand as a result of its decision.
None of the 450 staff based in Auckland and its Christchurch headquarters will lose their jobs, rather the number of pilot and cabin crew positions will increase.
New Zealand Airline Pilots' Association president Mark Rammell says the industry anticipated the move.
"The load factors on Pacific Blue have been well down ... and they've clearly been losing an awful lot of money.
"There's really only room, I think, for two jet operations in the New Zealand domestic market and it was always inevitable that someone was going to leave."
The union says it could affect pilots' working conditions and this can be addressed as part of the collective contract negotiations under way.
