Air New Zealand and Virgin Australia will end their transtasman alliance in October this year following seven years of partnership.
The airlines commenced the strategic alliance at the end of 2010 to co-operate on services between New Zealand and Australia.
The deal expires at the end of October this year and the parties will not apply to regulators for renewal.
Air New Zealand chief revenue officer Cam Wallace says market dynamics on the Tasman have changed and the time is now right for each airline to focus on its own objectives.
"Australia is the largest source of inbound visitors to New Zealand and Air New Zealand has built up a significant presence in this market,'' he said.
Air New Zealand is putting more widebody aircraft and newer A320s on the route and says the move would enable it ''to deliver a more consistent customer experience'' by using its own fleet and delivering an improved schedule.
Details would be provided shortly.
"We remain fully committed to our other alliance relationships and our overall global airline alliance strategy as a critical success factor in other markets."
Current transtasman alliance arrangements - including extra services by Virgin Australia to fill a gap left by Emirates A380s - would remain in place until October 27 and customers travelling before this date will be unaffected.
Customers booked with Air New Zealand to travel on a Virgin Australia service (or vice versa) after that would be contacted by their booking airline.
Air New Zealand sold down a 24 per cent stake in the Australian airline but maintained the alliance arrangement.
