Jetstar plans to start flights to regional destinations later this year and promises "low fares competition" in what will be a major shakeup for domestic air travel.

The low-cost carrier will use a fleet of five 50-seat Bombardier Q300 turbo-prop aircraft to fly to at least four regional centres initially.

Those cities being considered include Hamilton, Rotorua, New Plymouth, Napier and Palmerston North in the North Island and Nelson and Invercargill in the South Island.

The new flights will break Air New Zealand's stanglehold on flying large aircraft to regional centres. Air NZ shares plunged by close to 10 per cent this morning after the Jetstar move into the regions was tipped by the Business Herald.

Air NZ pulled out of three regional towns earlier this year and is closing its Eagle Air operation while putting bigger aircraft into the bigger cities. The airline made those moves and restructured regional fares after complaints they were too high.

Jetstar is making the announcement in Auckland this afternoon with Prime Minister and Tourism Minister John Key.

The airline said its new flights -- due to start in December -- would bring "low fares competition to monopoly domestic routes around the country".

Jeststar is fully owned by Qantas whose chief executive Alan Joyce said the time was right to bring Jetstar's fares to the regions.

"When Jetstar brought low fares to New Zealand's key routes six years ago it completely transformed the market in terms of value and now we'll do the same for regional New Zealand," he said.

There had been calls for more choice and lower fares on regional routes, Joyce said.

"We're answering that call by launching Jetstar flights to regional New Zealand, making air travel more affordable for people who live outside the main centres and boosting tourism and the economies of these areas."

The new regional destinations would connect to the broader Qantas Group network, including both Qantas and Jetstar flying across the Tasman.

Jetstar Group chief executive Jayne Hrdlicka said the Jetstar on-time performance had improved during the past two years and was well placed for regional expansion.

"When we first started operations in New Zealand, domestic fares across the country dropped by around 40 per cent, and we expect fares will drop considerably on the regional routes where we'll operate."

Jetstar managers would visit regional centres during the next two months to meet airports, local government and business, travel and tourism representatives to determine the first regional destinations.

Jetstar launched Trans-Tasman flights in 2005 and established domestic operations in New Zealand in June 2009. The low-cost carrier's fleet of nine Airbus A320 aircraft operate up to 240 domestic and 100 international flights a week.

Jetstar has crew bases in Auckland and Christchurch and already employs more than 400 pilots, cabin crew, engineers and ground crew around the country.

The Jetstar-branded regional services will be operated by QantasLink.

Under the arrangement, Qantas-owned Eastern Australia Airlines, which has operated Q300 aircraft in Australia for QantasLink for over 15 years, will manage the aircraft operations.

Air NZ also operates the Bombardier Q300s. The airline's shares were trading down 9.8 per cent at $2.39 early this afternoon.