Low-cost offshoot Jetstar will replace the Flying Kangaroo throughout New Zealand's domestic market from June 10 and the schedules for China and India will be overhauled.
Chief executive Alan Joyce remained positive despite the changes.
"These changes are about adjusting our schedules to meet the needs of those markets alongside our own need to generate reasonable returns on our operations," Mr Joyce said.
Qantas will also cut its Melbourne-Shanghai and Sydney-Beijing flights, but the Sydney-Shanghai service will be increased from five flights per week to seven from March 31.
Mr Joyce said the decision to pull the legacy carrier out of New Zealand's domestic market was built on the "unique" dynamics of the market.
"We need to be flexible to ensure we remain competitive," he said.
"This means applying our two-brand strategy and utilising the right airline, with the right cost base and product for the right market, to offer competitive, sustainable services."
The airline's announcement comes amid continuing dire news from the aviation sector.
Singapore Airlines yesterday confirmed it would cut capacity by 11 per cent from April.
It will also decommission 17 planes.
"The drop in air transportation has been sharp and swift," Singapore Airline's chief executive Chew Choon Seng said.
"Given the falls of over 20 per cent that we have seen recently in air cargo shipments, and the tradition of demand for air travel following closely behind trends on the cargo side of the business, we have to face the reality that 2009 is going to be a very difficult year."
The latest data from the International Air Transport Association showed publicly listed airlines had lost half their value in the past year.
Airlines, the association said, were cutting capacity at 1.5 per cent, well below the drop reported by Singapore.
"With around $4 billion lost by the industry in the first three quarters, IATA's forecast for 2008 net losses of $5 billion is still in the right ballpark," the association's December-January financial health monitor said.