Air New Zealand says it's be upping it's domestic fares by 5 percent from this Thursday.

The airline told the Herald the fare increase is in response to operational pressures, including labour, fuel, goods and services which Air New Zealand is unable to keep absorbing.

Head of Private Wealth Research at Forsyth Barr, Rob Mercer says it's easier to increase domestic fares than international.

"The area that's got the least competition is the domestic part, so pushing prices up in the domestic area is probably the first port of call.

"Pricing globally and international airfares is a bit tougher."