Air New Zealand will continue to pour more capacity into its routes over the coming year and says this will mean cheaper fares.

The airline announced a record profit today and is putting on more seats across its network as it flies to new long haul destinations and uses bigger aircraft on its domestic routes.

Chief executive Christopher Luxon said the arrival of Jetstar on regional routes, along with other smaller airlines, would increase competition.

Read more: Air New Zealand slashes fares

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His airline had cut costs over the last year and the addition of more fuel efficient aircraft gave it more pricing flexibility.

Air New Zealand was adding more than 8 per cent in capacity during the 2015-16 year.

"That's going to create lots of good competition but I'm confident in our ability to stimulate the market and be able to fill those seats," Luxon said.

It would offer more than two million domestic fares expected for less than $100.

The airline is also facing the prospect of more competition across the Pacific with American Airlines investigating the viability of direct Auckland-United States flights.

While he had reservations about the rival airline moving into the route, Luxon said it would be met with strong competition from Air New Zealand.

"We'll be very competitive. We are fit to compete we are comfortable taking on any competition from any airline in the world."

Air New Zealand's staff also benefited from what Luxon described as a "terrific" result, with 8000 staff receiving bonuses of up to $1400.

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The company this morning revealed it pushed up pre-tax normalised earnings a massive 49 per cent to report $496 million for the 2015 financial year.

Statutory earnings before taxation were $474 million and statutory net profit after tax was $327 million, up a massive 24 per cent.

Operating cash flow of $1.1 billion was up 51 percent on the prior year, the airline said in a statement.

The company has declared a fully imputed dividend of 9.5 cents per share, an increase of 73 percent on the prior year, taking the total dividend for the year to 16 cents per share.

Chairman Tony Carter said strategic initiatives over the past three years had positioned the company well to take advantage of market dynamics which contributed to the record result.

"Our investment in new efficient aircraft, the continued development of our alliance partner relationships, world class sales and marketing execution, great customer service and strong focus on cost management have enabled Air New Zealand to achieve revenue growth against a stable cost base.

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"We indicated at our interim result that lower fuel prices and current sales momentum have strengthened the company's outlook, and this has seen the delivery of a record annual result that our shareholders and staff can be immensely proud of," Carter said.

"Given the current known operating environment, along with our increased capacity and improved operating efficiencies, we expect to achieve significant earnings growth in the coming year."

Chief Executive Officer Christopher Luxon said a continued focus on commercial results, and enhancing customer experience contributed to the result.

The company remained focussed on the Pacific Rim for its growth strategy and was aiming to maintain and grow its market share in the region, Luxon said.

"Next year will see further capacity growth in international markets as we look forward to new routes starting in December 2015 to Houston and Buenos Aires. And while we are gearing up to launch these exciting new routes we have a team assessing potential new opportunities in Australia, Asia and the Americas. "

Five reasons for Air NZ's half billion dollar profit

Air New Zealand earnings before tax were a record $474 million and bottom line net profit $327m for the financial year to June 30. Here are five reasons behind the bumper result.

1. The airline has not only increased the number of seats it has on offer - it is filling them at the same rate. Capacity and demand is up 6.6 cent meaning Air New Zealand has the right planes on the right routes. Airlines can lose money quickly when they put extra capacity into the market that's not matched by the number of passengers.

2. Yield or margin per set has edged up (by 0.9 per cent) and that's important if the number of passengers carried is increasing. The airline carries about 14 million passengers year and these numbers were up 4.2 per cent over the last year.

3. The airline has cut unit costs by 4 per cent through simplifying its business and being able to take advantage of economies of scale as it has grown rapidly over the past year.

4. Like other airlines, Air New Zealand is saving millions through lower fuel prices. The airline has saved $74 million during the past year and expects to save around on $300 million on fuel during the coming year.

5. Cargo growth is also strong. Revenue is up $30 million to $317 million.

See the full result announcement here: