The government is suggesting it could wield influence over Air New Zealand through board appointments as the company looks at dropping another regional service
It has little control over the airline's decisions, despite owning 51 percent of the shares.
Yesterday, Regional Economic Development Minister Shane Jones said the airline was short-changing services to the regions.
"Do what you're meant to be doing, you are servicing New Zealand, and if you are not prepared to service the entirety of New Zealand, don't go overseas and promote New Zealand unless you are practicing what you preach in the provinces."
The airline abruptly withdrew its service into Kāpiti earlier this month. Three years ago it stopped flying to Kaitaia, Whakatāne, Westport and Taupō.
Air New Zealand told shareholding Minister Grant Robertson that it would always act independently of the Crown.
It said a lack of commercial independence was viewed seriously by the board and could damage the interests of all shareholders.
Mr Robertson said many people were upset by the withdrawal of services but there was not much the government could do.
"Ultimately they make their own operational decisions, that has not changed, that's simply the nature of the arrangement of the ownership.
"We're only a 51 percent owner, we don't get to control every decision, that's the reality."
However, he said there could be areas where the government could act.
"We've got means and mechanisms by which we can influence in terms of the composition of the board, and we will look at that at the appropriate time."
The Air New Zealand constitution states a third of the five-to-eight person board must resign, but may be re-elected, at the annual shareholders meeting in September.
That is where the government, which owns 51-percent of the shares, could wield some power.
NZ has one of the world's best regional networks - Air NZ CEO
Air NZ chief executive Christopher Luxon told Morning Report he was "incredibly proud" of its service to the provinces.
"That's partly why we took issue with what Shane's comments yesterday because while they were his opinions they're actually not consistent with the set of facts that we see."
The airline had delivered almost two million extra seats into the regions and airfares to those places was down 8 percent, he said.
New Zealand had one of the best regional networks in the world, Mr Luxon said.
In Australia, which he said had the second best regional coverage in the world, only 56 percent of towns of 20,000 people or more were served, while New Zealand had nearly 100 percent coverage.
Mr Luxon said towns the airline had pulled out of, such as Whanganui and Whakatāne, had been picked up by other carriers.
He said 15 of the small centres it flew in 2014 did not make any money.
Jones tells Air NZ CEO to butt out
Mr Jones told Morning Report Air New Zealand's board chair needed to step down.
"The board, in my view, [is] no longer serving a purpose that suits the entirety of New Zealand."
He said he had raised a legitimate issue on behalf of areas "shortchanged" by the airline.
"I would say to the CEO 'do not poke your nose into the political boxing ring unless you're going to resign today and joint the ranks of the National Party'".
He said he would lobby Mr Robertson so the "days of running Air New Zealand as an extension of the last government are over".
This is escalating quickly. Surely we can disagree with the company without trashing it. Is PM Ardern going to be able to haul her second NZ First Minister into line or are we looking at another “Russia” situation? https://t.co/TI0hax64Ex— Steven Joyce (@stevenljoyce) March 20, 2018
National warns govt to be careful
National Party finance spokesperson Amy Adams said the government must be careful.
"Once they've appointed that board member, I don't think there should be any suggestion that director is the government's person.
"Once appointed a director must act in the best interests of the company, not in accordance with what the government wants them to do."
National Party MP Nathan Guy has been petitioning for flights to continue from Auckland to his local Kāpiti airport.
"I've spoken to [Air New Zealand director] Sir John Key, I've spoken to the chief executive Christopher Luxton - I've expressed my view as a local MP, [which is] one of disappointment."
Meanwhile, deputy Prime Minister Winston Peters said he was having ongoing discussions with the Air New Zealand board.
"You can't make every route profitable in any transportation scheme, but the combination of them all together is what makes the profit - we just want them to have regard for that."