I do find it funny that people in NZ find "profit" and "making money" to be dirty words. If a company turns a profit here, it is perceived to be gouging customers, but when a company goes bankrupt because it didn't turn a profit, people scratch their heads wondering why they didn't price themselves appropriately.
Air New Zealand, although being 53% Government owned, is not a government department so is under no obligation to provide any services to any destination that doesn't make a profit for the airline.
There are no subsidies available by the government to fly routes that are marginal either (except for some regions who may have "helped" the Australians set up a poor excuse for a regional operation in NZ - give me Air Chats running a regional operation any day!).
For those who are complaining the most about loosing the air service would most likely be the ones who would prefer to drive elsewhere to fly in the perception that it will be cheaper.
Last time I flew out of Auckland, the cost of car parking alone for two weeks was about the same price as driving my car three hours to Tauranga, parking it there and flying back to Auckland!