Qantas is confident it can overcome the impact of fuel costs which dented first-half profits.
In an upbeat assessment of prospects for the full year, group chief executive Alan Joyce said there were strong forward bookings, competitor capacity growth had slowed and oil prices had fallen from peaks seen late last year.
''These factors point to a strong second half and we expect to completely recover our increased fuel costs by the end of this financial year," he said.
Almost two-thirds of the increased fuel bill would be felt in the first half.
The Qantas announcement was more optimistic than a warning from Air New Zealand three weeks ago, in which it said softer than expected demand would mean its full-year underlying profit could be far lower than forecast last year.
Qantas today reported its half-year profit had fallen A$179 million ($NZ187m) as fuel costs rose by 27 per cent.
Its underlying profit before tax was A$780m, down 19 per cent on last year's six-month result to December 31, a record for the airline.
Fuel costs were up $416m for the latest six months. Total fuel cost for the full year would be $3.9b.
Statutory profit before tax was $735m and after tax it was $498m, a fall from $595m in last year's first-half result.
Joyce said he was pleased with how the business responded to the challenges and opportunities in the half-year.
"Our dual-brand strategy with Qantas and Jetstar in the domestic market meant these segments delivered another set of record earnings. Across our network, capacity is broadly meeting demand, including shifts to capitalise on the continued strength of the resources sector,'' he said.
Higher oil prices were a significant headwind and the airline moved quickly to recover as much of the cost as it could.
''That's easier to achieve in the domestic market than on longer international routes, where fuel is a much bigger factor, and that's reflected in the segment results we're reporting today.''
The airline faced an increase in selling costs, due simply to the commissions associated with the 6 per cent rise in revenue, as well as costs linked to a weaker Australian dollar.
Qantas was making good progress against its longer-term strategy, Joyce said. More Boeing 787s arrived to replace the less fuel-efficient 747s.
Joyce said the airline was mindful of potential signs of weakness in the broader economy and was adjusting capacity to meet demand in individual markets.
Capacity to the Northern Territory had been reduced while growth in the resources sector had led to a 10 per cent increase in Western Australia. The airline was closely watching the Chinese market, which was showing signs of slowing down.
''Overall revenue and yield indicators remain positive.''
In response to questions, Joyce said there was no sign of demand flagging in the high-yield premium cabins. On its Perth-London service, premium cabins were 95 per cent full.
Its domestic operation achieved another record profit, up 1 per cent to $659m, made up of record earnings from both Qantas and Jetstar. It does not break out the performance of its New Zealand operation.
Qantas International's revenue increased by almost 7 per cent to $3.7b but EBIT declined by 60 per cent to $90m, due largely to a rapid rise in fuel costs (up by $219m for the half) that couldn't be fully recovered.
Joyce took a swipe at airports, particularly their parking charges. He said some airfares from Hobart to Melbourne were far less than weekend parking charges in the Tasmanian capital.
Air New Zealand, which reports its half-year result next week, has warned its profit could be sharply down on what it forecast last year.
In a late January announcement, chief executive Christopher Luxon trimmed pre-tax earnings guidance to a range of $340m-$400m for the June year due to slower-than-expected revenue growth.
The previously announced guidance was for underlying earnings before tax of $425m-$525m, which excluded an estimated $30m to $40m impact of schedule changes prompted by the global Rolls-Royce engine issues.
Luxon said the revised guidance reflected updated revenue forecasts based on recent forward booking trends, and that "difficult decisions" lay ahead.
While revenue growth forecast was still positive, the rate of growth was likely to be slower than previously thought. Markets showing signs of slower growth include domestic leisure travel and softening inbound tourism traffic.
The airline announced before Christmas that it was looking for cost savings of $30m and is reviewing all its routes.
Capacity growth for the full year was previously expected to be up to 6 per cent but this has been revised down to 4 per cent, the lower end of guidance.
Air New Zealand's former partner, Virgin Australia, last week reported a sharp rise in underlying profit before tax. It was up 142 per cent to A$102.5m, the airline's highest in 10 years, on a 6 per cent lift in revenue to $2.8b.