Flights booked and paid for before Monday 17 May, for travel commencing after this date will not be subject to this surcharge.

Flights on Air New Zealand's regional Link services will incur a $3 (inclusive of GST) surcharge per one-way journey and domestic main trunk jet services a $6 (inclusive of GST) per one-way journey surcharge. Trans-Tasman and Pacific Island flights will incur a $15 per sector surcharge and long haul flights a $20 per sector surcharge. The surcharge will be incorporated into the cost of the fare.

Flights originating in a regional centre and connecting with a domestic main trunk jet service will only incur a $6 fare increase per one-way journey.

Cargo rates will have a fuel surcharge of 10 cents per kg on Tasman routes, 16 cents per kg to the Pacific Islands, Asia and Japan, and 30 cents per kg to North America, UK and Europe.

Group General Manager Marketing/Network/Sales, Norm Thompson, says that while Air New Zealand has absorbed the escalating fuels costs until now, regrettably the current market conditions have made it necessary to implement the surcharge.

"The cost of a barrel of Singapore Jet Fuel has increased by more than 60 percent in the last year. This has been compounded by the value of the New Zealand dollar dropping rapidly against the United States dollar, the currency in which we pay for fuel. For many months now, our hedging policy has allowed us to partially absorb this extra cost in the hope that normality would return to the fuel market. However, it is clear this may be some time off and we can no longer carry these high prices at the current exchange rate," Mr Thompson says.

He says it appears the aviation industry may be hit by the high cost of fuel for the foreseeable future.

"Air New Zealand budgeted that Singapore Jet Fuel would be US$29 a barrel over FY04. For many months now, the price has been above US$35 a barrel, peaking at above US$46 a barrel. On top of that, the New Zealand dollar has fallen from a high of almost US 71 cents in February to a recent low of almost US 60 cents. The compounding effect of these two movements has unfortunately resulted in a situation that we cannot sustain."

Mr Thompson says that when fuel prices settle back into a normal trading range, and the dollar steadies, the surcharges will be withdrawn.

Other airlines to implement surcharges or fare increases as the result of the high price of jet fuel include Qantas, British Airways, Continental Airlines and American Airlines, while numerous other airlines around the world are also considering similar surcharges.

NOTE: The content of all Air New Zealand media releases are accurate at the time of issue, as stated at the top of each release. For updates on any changes, please contact Air New Zealand.

Air New Zealand is proud to be a member of Star Alliance. The Star Alliance network was established in 1997 as the first truly global airline alliance to offer worldwide reach, recognition and seamless service to the international traveller. Its acceptance by the market has been recognised by numerous awards, including the Air Transport World Market Leadership Award, Best Airline Alliance by both Business Traveller Magazine and Skytrax. The member airlines are: Adria Airways, Air Canada, Air China, Air New Zealand, ANA, Asiana Airlines, Austrian, Blue1, bmi, Continental Airlines, Croatia Airlines, EGYPTAIR, LOT Polish Airlines, Lufthansa, Scandinavian Airlines, Shanghai Airlines, Singapore Airlines, South African Airways, Spanair, SWISS, TAP Portugal, Turkish Airlines, THAI, United and US Airways. Aegean Airlines, Air India, Brussels Airlines and TAM have been announced as future members. Overall, the Star Alliance network offers 19,500 daily flights to 1,071 airports in 171 countries.

For more information about Air New Zealand visit www.airnewzealand.com and for more information about Star Alliance visit www.staralliance.com.