AIR New Zealand is on course for an even better result after reporting its best profit in five years. The airline is not specifying targets but is forecasting a better profit than the $182 million it made in the year to June 30 and says it has made a strong start to the year.
Chief executive Christopher Luxon said he wanted the airline to "become a sales and marketing and in-market execution machine".
He said the airline was building on a strong performance across the board.
"We've got off to a very good start. It's still early days but we're very encouraged by the first month of this year and importantly as we look forward in our bookings they remain very, very strong."
Analysts have praised the result, which contrasts with that of Qantas - an airline with a wide-body fleet more than three times bigger than Air New Zealand's - which yesterday limped back into the black with a A$5 million profit and will not pay a dividend for the fourth year in a row.
Virgin Australia, in which Air New Zealand holds a 23 per cent stake, is on track to report a loss of around A$100 million.
An analyst at Craigs Investment Partners, Chris Byrne, said that like any owner the Government would look more closely at selling down a company whose profits were growing strongly and could be attractive to new investors.
"It's one of the best-performing airlines in the world, they're operating in a conservative manner with the dividend falling to below 50 per cent now so that gives them significant ability to withstand a shock and they've got over $1 billion in cash."
Air New Zealand will pay a final dividend of 5c a share, making 8c for the year, up 45 per cent from a year earlier.
Although shares rose more than 4 per cent in early trading, Matthew Goodson, managing director at Salt Funds Management, said the airline's share price could be higher if there was not a general expectation that up to 23 per cent of the Government's stake could soon be sold.
"Whether it paves the way for the Government to sell down its holding to just over 50 per cent - which would be be a far easier prospect than the sell down of Meridian - will be interesting."
Shares closed up 1.46 per cent, or 2c, at $1.39.
Head of private wealth research at Forsyth Barr Rob Mercer said Air New Zealand had been methodically going about making improvements, operating efficiently and investing well.
The airline had negotiated significant discounts for fleet additions it is spending $1.8 billion on in the next three years.
"Air New Zealand is working with Boeing to keep the relationship out of the media and get the benefit of bringing [lower-priced] aircraft into the fleet."
Marcus Curley of Goldman Sachs said the result surpassed expectations and the outlook statement was "very positive".
He said the consolidation of long-haul routes had not only helped improve yield but also cut costs.
Qantas and Emirates had just extended a global partnership to include transtasman routes although Air New Zealand fares were now looking more competitive against them, Curley said.
The airline's international services reported the strongest improvement in yield in 2013, rising 4.3 per cent to 10.6c per revenue passenger kilometre (RPK) after rationalising its network, including suspending the Hong Kong to London route.
On the Tasman and Pacific Island routes, yield rose 1.9 per cent as the company added capacity.
Luxon said it was on track to get the first of its 787 Dreamliners around the middle of next year that will replace replace older aircraft flying to Asia, Western Australia and holiday destinations in the Pacific.