After flagging this as a possibility just a few days ago, Air New Zealand has introduced the seats to suit option to its domestic fares. No real fanfare so far, although there has been the odd hyped up headline, such as Air New Zealand slashes domestic fares [I'm not sure that an average of 6% drop is "slashing"], but never mind. The Australian Business Traveller possibly has the most appropriate headline with Air New Zealand goes low-cost carrier with "seat only" domestic fares. Still, it's not all bad - actually, I think it is a good move.
However, after some comparisons a few days ago for flights in February 2012, I thought I would take a look and see what the fare difference is now. I know that this is not scientific - it's an extremely small [single day] check - but unfortunately, Air New Zealand's cheapest fares [now without checked luggage] are the same price as they were, and so Jetstar is now $20 a sector cheaper, likewise when you add the checked baggage option [the fully flexible fares from both operators are the same price]! I guess time will tell what comes of this - Air NZ is a good operator and I'm sure they will be very competitive.
It will be interesting to know how Air NZ will go about enforcing the 7kg weight and size limits for cabin baggage - this could be a real source of frustration for passengers. Also, with their smallest aircraft [the B1900D] having no overhead lockers and limited under-seat space [not to mention ATR72-600's coming on line over the next couple or so years], I can't help wondering if the B1900's will have a limited future lifespan... too early for predictions from me though!