Thomson said New Zealand has a "complicated geography", being the size of Japan with a population of Sydney.
He said the airline's costs have gone up 30% in three years and the cost per seat of operating smaller aircraft had increased as a result.
It comes after Tauranga resident Scott Koster lodged a complaint with the Commerce Commission about the cost of airfares.
Koster said it was cheaper for his university student daughter to take a bus from Tauranga to Auckland, an Uber to the airport and then fly Jetstar to Wellington to Victoria University, than fly on Air NZ.
Thomson said it is regrettable that flying is unaffordable to some.
He said the public should rest assured the airline is doing its best to keep costs down but needs to run an economic operation.
He said whilst Consumer NZ had called for a ministerial inquiry into the cost of airfares, it would likely be a costly exercise and not deliver any meaningful information.
