A leading transport analyst expects domestic air tickets to continue to be discounted over the coming months as Air New Zealand grapples with falling demand.

Air New Zealand’s October passenger statistics point to slowing demand on domestic routes, alongside lower-margin leisure travel and lower capacity.

Forsyth Barr head of research Andy Bowley said the national carrier’s latest operating data for October confirmed its financial update, released last month.

The airline said volatile fuel prices, increasing competition and an uncertain economic environment prompted it to lower its forecast first-half profit.

The national carrier was forecasting a pre-tax profit of between $180 million and $230m for the six months ending in December, down from $299m the year earlier.

Bowley said the latest statistics highlighted deteriorating yields on short-haul flights, while long-haul demand was “reasonably robust”, supporting domestic traffic with connecting international passengers.

“The result being that domestic demand outside of the international transfers is weakening,” he said.

“So passenger fares are coming down.”

However, he said that while demand had softened, weaker Brent crude oil and jet fuel prices over the last few weeks would help support its near-term earnings.

By Nona Pelletier of rnz.co.nz