Air New Zealand is optimistic operating earnings will improve next year despite another "tough year", its chairman told its annual shareholder meeting yesterday.

"We are one of very few airlines in the world to have paid a dividend through the last two challenging years," John Palmer said.

The board paid out a total shareholder of $75 million in dividends in the year to June 30. That was an increase of 8 per cent on last year and reflected an "improved outlook".

The airline reported an annual pre-tax profit of $137 million, 6 per cent less than the year before.

The board had confidence in Air New Zealand's ability to return to stronger profitability in the medium term, while also recognising the need for preserving "financial flexibility", Palmer said.

Despite another "tough year" it had $1.1 billion in cash, operating cash flow was up 33 per cent and gearing, including capitalised operating leases, was at 47 per cent.

Chief executive Rob Fyfe took an opportunity to have a crack at the Australian Competition and Consumer Commission.

The commission signalled in a draft determination that it intended to decline Air NZ's transtasman alliance proposal with Virgin Blue.

Fyfe said the deal with Virgin Blue was a "critical plank" in Air NZ's business strategy in the face of "structural disadvantages we face as a result of the accelerating pace of global consolidation".

He said Air NZ was very disappointed by ACCC's draft decision, which "effectively puts at risk competition within Australia and across the Tasman".

"We believe the regulator charged with promoting competition is at serious risk of killing it off."