He said the airline would use a bio fuel and kerosene mix in one Rolls Royce engine of a Boeing 747 jumbo jet on a yet-to-be decided long-haul route from its home base in Auckland late next year or in early 2009.
The other three engines on the flight, which will not carry passengers, will be powered by regular aviation fuel.
Fyfe said the airline, which is 76.5 percent owned by the government, would work with aircraft and engine manufacturers to develop bio fuels for commercial aircrafts.
They would work together on projects aimed at ensuring that commercial aviation became more environmentally sustainable, he said.
Fyfe said that only a year ago bio fuel seemed like a "pie in the sky" to many aviation industry observers, but technology was moving so fast it may become viable in a much shorter timeframe than previously thought.
He said Air New Zealand aimed to lead the global aviation industry in developing the most environmentally responsible airline practices possible.
Fyfe said the airline would like to progress to using all New Zealand bio fuel for future tests flights, but sourcing the quantity necessary may be a challenge.