More than 2000 passengers are expected to travel in and out of Queenstown Airport each week on Jetstar's daily Christchurch and Auckland links.
The low-cost Qantas subsidiary's commercial executive manager, David Koczkar, said good patronage would increase Queenstown services from the present rate of two a day.
Additional aircraft were on order for the entire network and the airline was offering 29% more seat capacity, or almost 2500 extra seats, a week more than its domestic predecessor, Qantas.
Mr Koczkar said strong demand for air travel had prompted the expansion into Queenstown and New Zealand generally, despite the economic climate.
"In these tough times, people still need a holiday and are even more conscious of getting good value for money.
And because we have a lower cost base than our competitors, it allows us to be more sustainable."
Destination Queenstown chief executive Stephen Pahl said low-cost flights into Queenstown were what many visitors needed during the economic downturn.
"Coinciding with the start of the Queenstown ski season, the timing of the Jetstar domestic service is right on."
Passengers waited for an extra 90 minutes for the first Jetstar flight into Otago, at Queenstown Airport, on Wednesday.
Flight JQ279, an Airbus A320 carrying almost the full capacity of 177 passengers, landed at 12.20pm.
The flight by New Zealand's second-largest domestic airline was delayed when a hydraulic cargo loader malfunctioned at Wellington Airport earlier.
Nevertheless, Queenstown Airport emergency vehicles fired arcs of water for the new aircraft to taxi through and passengers were offered complimentary refreshments in the terminal building, which had been decorated in Jetstar's colours and logos.
Jetstar takes over three domestic gates at the airport from Qantas, although Qantas international flights continue.
Queenstown Airport chief executive Steve Sanderson said Jetstar's arrival was fantastic for the airport and the resort.
"It's not often airports get a chance to introduce new airlines and we really welcome it. We look forward to Jetstar growing their domestic market."
Mr Sanderson said the airport wanted to see routes established with the Gold Coast, connections with Hamilton and the addition of runway lights in the future.
Pacific Blue announced last week it will add new direct services to Australia from Queenstown, Dunedin and Wellington from September 1.
When asked if he thought this would spark a price war between the low-cost carriers, he said it was up to the airlines to establish their markets.
