However, a positive outlook and plans to increase domestic and long-haul services have captured the attention of investors looking beyond bottom-line analysis.
For the year to June, Air New Zealand revenue fell 12%, or $600 million, from $4.6 billion to $4 billion. Overall passenger numbers were down 4.7%; long-haul passengers almost 7% down, but a domestic figures lifted 0.7%.
Craigs Investment Partners broker Peter McIntyre said the result was in line with many other company results, reflecting flat or subdued revenue, but investors were taking a positive cue from Air New Zealand chief executive Rob Fyfe's outlook.
"They are targeting more aircraft for domestic and transtasman routes; looking for significant capacity increases during 2011," Mr McIntyre said.
Shares in Air New Zealand spiked 3.3% or 4c to $1.25 after the announcement, which confirmed a full-year dividend of 7c per share, compared to 6.5c last year.
Chairman John Palmer said in a market statement the uncertainty surrounding the global economic recovery had continued to suppress demand for air travel in the past 12 months.
"[However] the investments we are making in product enhancements, improved service and process efficiencies have driven customer preference, which in turn creates market share and margin premiums, even in the current difficult times," he said.
Mr McIntyre said cargo fell from $374 million to $255 million, overall passenger numbers fell 4.7% and capacity dropped 8.5% in the past year.
Forsyth Barr broker Peter Young praised the result, being in line with expectations, with normalised profit of $92 million short of expectations by only $3 million.
"This was a very good result, because we had been a touch worried that the second-half trading may have deteriorated by more, particularly given the issues Virgin Blue and Qantas had," he said.
Earnings before interest and tax were $151 million, ahead of Forsyth Barr's target of $145 million, which Mr Young said was boosted by lower-than-expected depreciation and rentals costs of $557 million, boosted by the stronger New Zealand dollar against the US dollar.
"For airlines, it is all about momentum and Air New Zealand is now through the hardest part. Its earnings will improve in full-year 2011; its long-haul yields are already up 11% in July this year compared to last year."
Chief executive Rob Fyfe said the airline industry continued to be one of the most volatile global industries, with "key drivers" potentially affecting profits being oil prices, foreign exchange rates, competition, customer preferences and travel patterns.
"Failure to adapt to any one of these factors has the potential to significantly compromise Air New Zealand's profitability," he said.
Air New Zealand had a wide range of business initiatives under way, including significant capacity growth in coming months.
Domestically, growth plans for domestic jet operations would see capacity increasing by 8% progressively from September, the equivalent of one additional Boeing 737 aircraft.
Routes would include direct Dunedin-Auckland services increased by 46%, from 13 to 19 per week, and an Auckland-Queenstown capacity rise of 13.6%, an Auckland-Wellington capacity up by 9.0% and Auckland-Christchurch by 10.4% - buoyed by the arrival of the first new A320 aircraft in February.
Offshore, Air New Zealand has launched a new transtasman and Pacific Island service with four choices on its Christchurch-Sydney service, plus the reconfiguration of short-haul international A320 fleet to an all-economy 171-seat plan is increasing Tasman and Pacific Island capacity by 11%.
On the long-haul network, Air New Zealand is planning for on-schedule delivery of the first of five Boeing 777-300ER aircraft, with early bookings strong for the flights from Auckland to London via Los Angeles from April.
