Air New Zealand has reported a 31 per cent fall in full-year profit on the back of a higher fuel bill and warns the national carrier will need to make further cost cuts in a low-growth environment.
Outgoing chief executive Christopher Luxon said earnings in the year to June 30 were also weighed down by weakness in inbound tourism and domestic leisure demand, and problems with Rolls-Royce engines that have plagued its fleet of Boeing aircraft.
Still, Air New Zealand's profit before tax, the most closely watched measure of the company's performance, rose to $NZ374 million ($A353.4 million) compared with the $NZ340 million the airline forecast in a profit warning in May.
Revenue from continuing operations rose 5.4 per cent to $ NZ5.83 billion.
Air New Zealand shares were flat on the ASX on Thursday, down 0.38 per cent to $2.61 at 1145 AEST.
The airline, which launched a two-year cost reduction plan in March that included savings of $NZ750 million by deferring aircraft deliveries, aimed to cut costs by an additional $NZ60 million by the end of 2021, Luxon said, telling an investor call an external agency had been appointed to help run the process.
The airline forecast fiscal 2020 earnings in the range of $NZ350 million to $NZ450 million, in line with the consensus among six analysts polled by Refinitiv of $NZ436 million.
Airlines globally have struggled to maintain margins in the face of slowing travel demand and higher fuel prices but
pressure could ease given that oil prices have fallen from a peak in October.
Australia's Qantas Airways has reported a 17 per cent drop in annual profits hurt by higher fuel costs and a weaker Australian dollar.
Air New Zealand has also been hit by maintenance issues with Rolls-Royce Trent 1000 engines used in its Boeing planes that have affected 2,500 flights and led to 150 cancellations.
The company said it expected the engines to be back in service in the coming months.
Thursday's report was the last annual result under Luxon who steps down next month after seven years in the top job as he contemplates a career in politics.
Chief financial officer Jeff McDowall was named acting CEO this week.