* Jetstar lost $13.6 mln on routes in last financial year
* Softer demand, higher fuel costs affected long-term outlook
* Air New Zealand shares rise 2.2%, considers adding capacity (Adds details of losses, Air New Zealand CEO comment, shares)
Sept 25 (Reuters) - Australian low-cost airline Jetstar, a unit of Qantas Airways Ltd QAN.AX , said on Wednesday it would stop its loss-making regional Q300 turboprop services in New Zealand by November end, a move that would benefit rival Air New Zealand Ltd AIR.NZ .
The Melbourne-headquartered airline, which began flying to regional centres in New Zealand in late 2015, lost A$20 million ($13.57 million) on the routes in the financial year ended June 30, Jetstar Group Chief Executive Gareth Evans said.
"The New Zealand regional market is facing some headwinds, with softer demand and higher fuel costs and we don't see the outlook changing any time soon," he added.
Reacting to the move, rival Air New Zealand Chief Executive Christopher Luxon said at its annual meeting: "It does underscore how difficult it is flying in regional New Zealand."
Shares in Air New Zealand, which has 51 regional aircraft compared to Jetstar's five, rose 2.2% after the announcement and ended 1.9% higher on Wednesday. The country's flag carrier said it would consider whether to add capacity on the affected routes.
Jetstar, which currently offers up to 130 return services a week in peak season across five regional routes, said the move would not impact its other domestic and international jet services in New Zealand, that Evans said contributed 83% of its revenue.
Jetstar customers booked on regional services after Nov. 30 will be offered options, including a full refund, it said.
The airline said it would begin a consultation process on Wednesday with about 70 affected employees and a final decision was expected before October end.
"Alternative employment options would be available for all affected Jetstar regional employees – made up chiefly of pilots and cabin crew – across Jetstar and Qantas Group businesses in New Zealand and Australia," it said.
Meanwhile, Air New Zealand said it would offer discount airfares to Jetstar turboprop customers, adding that it would not increase its lowest lead-in fares on the routes affected by Jetstar's withdrawal until at least the end of 2020.
($1 = 1.4736 Australian dollars)