Air New Zealand says full-year earnings will rise more than 17 per cent after reining in fuel costs to deliver a record first-half profit.
Normalised earnings before tax would be in excess of $NZ300 million ($A279.71 million) in the year ending June 30, the company said on Thursday.
It earned $NZ256m on that basis a year earlier.
The airline made the forecast after posting first-half profit of $NZ140m, up from $NZ100m a year earlier, beating the $NZ130m forecast of First NZ Capital.
Normalised pretax earnings rose 29 per cent to a record $NZ180m. Operating revenue fell 1.6 per cent to $NZ2.3 billion including a $NZ49m impact of foreign exchange movements.
Passenger revenue was little changed at $NZ1.93b in the first half although the company was able to trim fuels costs by almost 10 per cent to $NZ572m, helped by efficiency measures and the benefits of a strong kiwi dollar.
Wage costs rose about seven per cent to $NZ566m and included some redundancies, training and maintenance while headcount remained little changed.
“We have worked hard on improving our cost base in an environment where we have not grown,” said chief executive Christopher Luxon.
The airline will pay a first-half dividend of 4.5 NZ cents a share, about 50 per cent above the year earlier payment.
The shares rose 1.1 per cent to $NZ1.77 and are above the $NZ1.65-a-piece price at which the government sold down 20 per cent of the airline last November, leaving it with 53 per cent.
In the past 12 months the shares have gained 32 per cent, almost twice the gains of the NZX 50 Index.
While passenger yield and traffic both rose, cargo volumes fell three per cent as it stopped servicing the Hong Kong-London route and rivalry trimmed cargo yields by about five per cent.
Air New Zealand is upgrading and expanding its fleet, including Boeing 787-9s and 777-300s set to start in mid-2014 and to lift capacity by about eight per cent in 2015.
Air New Zealand has increased ties with other airlines, including a code-share agreement inked with Singapore Airlines.
In November, the airline said it would take up its full entitlement to the rights issue of Virgin Australia, taking its stake up to 25.5 per cent and strengthening the alliance against arch rival Qantas.