Air New Zealand says its investment in new aircraft will eventually lead to cheaper domestic flights.

The airline announced yesterday it is expanding and upgrading its regional fleet and expects it will be able to increase domestic capacity by up to two million seats a year.

CEO Rob Fyfe says it will increase the amount of "seriously cheap grabaseat" fares available every day on the regional routes.

Macquarie Private Wealth markets analyst Brad Gordon told TVNZ today that Kiwi travellers, including business people going city to city, should benefit.

"For a consumer perspective it should mean it can hold seats as cheaply as possible," he said.

Gordon says the purchase will give Air New Zealand significantly more capacity at peak times and that leads to cheaper fares.

The national airline says it carried 2.8 million passengers to regional destinations eight years ago and 4.3 million in the last year.

It expects the new ATR 72-600 planes will allow it to increase that figure by two million passengers.

The first of the new fleet will arrive in a year's time.