"The four DAUs in the central city enable us to focus on maximising the efficiencies of our Go Wellington services," NZ Bus chief executive Zane Fulljames said.

The council put its bus services out to tender under the government's new public transport operating model, known as PTOM, for bus, ferry and rail, which attempts to get better value for money by linking payment to growth in patronage and reduced reliance on subsidies. The council's bus changes are scheduled to take effect by mid-2018.

"The outcome of the tender is expected to reduce operating costs by several million dollars a year, paving the way for new public transport initiatives such as fare discounts," the council said in a statement last night.

Tranzit said it will build 228 new buses and hire 380 additional drivers, with as many as possible coming from Wellington public transport Metlink system. The company currently provides urban and regional bus services, InterCity bus services, school bus runs and specialist vehicle hire across the North Island and throughout Christchurch.

The council said the new fleet will be "more environmentally friendly", improving air quality across the region and reducing emissions of harmful pollutants by at least 38 per cent in Wellington and by 84 per cent in the Hutt Valley.

Infratil warned at its annual investor briefing in March that it expected its NZ Bus business to be two thirds the size of its current business as it went through major recontracting in the Wellington and Auckland markets under PTOM. Still, it said market share and margin pressures were likely to be offset by productivity gains and the potential to repower its fleet.

The result was consistent with Infratil's recent comments on "the expected future scale of the NZ Business business and earnings guidance," it said.

Shares of Infratil fell 0.3 per cent to $2.975, and have shed 3.7 per cent the past 12 months.