By Jamie Freed

(Reuters) - Air New Zealand Ltd is operating less than one-third of its usual domestic capacity due to tough COVID restrictions in Auckland and doubts whether a travel bubble with Australia will reopen, the airline's chief executive said on Thursday.

"We're running almost 100% outside of Auckland," Air New Zealand CEO Greg Foran told Reuters in an interview. "It's a reasonable network but Auckland is literally two-thirds of the domestic network so it's a pretty significant impact to our business, not having Auckland operating at this stage."

The airline has said it is burning through around NZ$25 million ($17.30 million) to NZ$35 million of cash a month due to the lockdown in the country's largest city, which the government says will be scaled back in phases as vaccination rates rise.

The Pacific nation was among just a handful of countries to bring COVID-19 cases down to zero last year and largely stayed virus-free until an outbreak of the highly infectious Delta variant in mid-August frustrated efforts to stamp out transmission.

The closure of a quarantine-free travel bubble with Australia is costing the airline another NZ$20 million to NZ$25 million a month in cash burn.

Foran said it was possible the New Zealand government would treat Australia like any other country in the future when it came to testing and quarantine rules, as is being done now.

"It will be up to the New Zealand government to decide if they going to relax (mandatory quarantine) for people who were vaccinated," he said. "Maybe they can do isolation at home or maybe hopefully in time they don't have to do any. But the way it was operating in April, May and June, I'm not convinced it ever returns."

The company has suspended its earnings guidance for the financial year ending June 30 amid the challenging market conditions.

($1 = 1.4453 New Zealand dollars)

(Reporting by Jamie Freed in Sydney; Editing by Raju Gopalakrishnan)