Air New Zealand says it will dispute the conditional approval issued by the Australian Competition and Consumer Commission to extend the Virgin Australia - Air New Zealand trans-Tasman alliance.
The ACCC has granted the two airlines provisional approval to continue their partnership for three more years, instead of the five requested. They will not be able to cut services on some routes.
In a draft determination, the ACCC said the public will benefit from the alliance in many ways including more flights.
But it is concerned that it may affect competition on some minor routes between Christchurch to Melbourne or Brisbane; Wellington or Queenstown to Brisbane; Auckland to the Gold Coast; and Dunedin to Sydney, Melbourne and Brisbane.
To address this, it said Virgin Australia and Air New Zealand will have to maintain capacity on these routes.
Forsyth Barr head of private wealth research Rob Mercer said imposing that rule is not commercially sensible.
He said the airlines have a case to say that the environment can shift quickly for airlines and it's important for their ability to maintain profitability and service that they can adjust their businesses.
Mr Mercer said the ACCC's decision to only grant a three year extension is a concern.
Mr Mercer said it will make it difficult for airlines to plan strategically and invest in the alliances if every two or three years they are forced to go through the same process with a degree of uncertainty.
The extension to the alliance is also subject to approval from the New Zealand Ministry of Transport.