Air New Zealand today announced normalised earnings* before taxation of $96 million for the six month period ended 31 December 2009, an increase of $70 million on the same period last year.

The Board has declared a fully imputed interim dividend of three cents per share.

Key highlights

Normalised earnings* before taxation of $96 million, up $70 million

Normalised earnings* after taxation of $64 million

Operating revenue down 15% to $2.1 billion

Passenger demand down 4.6%

Passenger load factor up 3 percentage points to 81.6%

Net cash position $1.1 billion

Interim dividend of 3.0 cents

"In very challenging conditions this is a good result," says Air New Zealand Chairman John Palmer.

"The fallout from the global financial crisis continued to make operating conditions extremely difficult. This has been reflected in lower passenger numbers, cargo volumes and yields, resulting in a 15 percent reduction in revenues. At the same time, fuel prices have returned to more stable levels following unprecedented volatility in the 2009 financial year," Mr Palmer says.

"Delivering a profit during this time is a reflection of the Management team's focus on closely aligning capacity with demand and their ability to deliver innovative solutions to significantly enhance the airline's competitive position."

Air New Zealand Chief Executive Officer Rob Fyfe says the result reflects the considerable efforts of more than 10,500 Air New Zealanders and their continued focus on delivering world-class results.

"Those efforts were recognised with the recent Air Transport World Airline of the Year Award and are reinforced by the airline's strong performance in the first half of this financial year," says Mr Fyfe.

"We worked hard to adapt the business to reflect the lower revenue base. As a result, we achieved an 11 percent reduction in non-fuel operating costs, with all operating costs reduced."

Mr Fyfe says innovation remains a key theme for the year ahead.

"We have set out to create a culture that enables Air New Zealanders to have the confidence to think outside the square, and to proactively and creatively pursue solutions.

"The next 12 months will be one of the most defining in Air New Zealand's history. Our competitors will be scrambling to catch up as we introduce a world-first long-haul experience, continue to evolve our trans-Tasman and Pacific Island operation and introduce more capacity into our domestic jet operation with the arrival of new A320 aircraft."

Mr Fyfe says the improvements are close to implementation and will ensure Air New Zealand can compete effectively against both budget and full-service airlines.

"There is no question the next year will set the direction and identity of our airline for the next decade," says Mr Fyfe. Outlook

There has been a stabilisation and recovery of the trading environment, although demand and average fares still remain significantly lower than prior periods. The challenge remains to improve passenger numbers and yields.

In recent periods the volatility of fuel prices and foreign exchange rates has overshadowed the natural seasonality of Air New Zealand's business. We expect a more normal seasonal balance this year with the second half weaker than the first.

In addition if current exchange rates continue, there will be a foreign exchange hedging loss of around $20 million in the second half compared to a gain of $24 million in the first half. We expect the business to remain profitable in the second half.

* Normalised earnings exclude the impact of derivatives that hedge exposures in other financial periods.