Air New Zealand reported a return to profit in the second half of the year on Thursday and said it expected to more than double earnings for 2013 as passenger numbers pick up.
Lower fuel and maintenance costs pushed net profit after tax to NZD$33 million in the six months to June 30, bouncing back from a loss of NZD$17 million a year ago.
The airline's performance was in contrast to Australian rival Qantas, which last week reported a net loss for the first time in 17 years due to its international division.
"They're certainly in a much better position than Qantas and Virgin in Australia. They're dealing with fuel costs quite well... and it's very positive guidance," said Mark Whittaker, portfolio manager at Milford Asset Management.
The airline said growth in international passenger numbers was held back by weak demand in Europe and Japan, but it maintained domestic passengers in the aftermath of the Rugby World Cup in September-October.
Normalised profit before tax, which excludes fluctuations in fuel hedging, rose to NZD$91 million for the year from NZD$75 million a year ago. The airline said it was targeting strong growth.
"Despite the uncertain global economy, assuming our current forecast of market demand and fuel prices at current elevated levels, we expect to deliver a more than 100 percent improvement in normalised earnings before taxation in the 2013 financial year," Chairman John Palmer said in a statement.
The company declared a final dividend of 3.5 cents per share, compared with 2.5 cents last year.
An improvement in domestic passenger yield boosted revenue, while a rise in passenger and cargo loads helped to raise fuel efficiency of the airline's fleet, helping its bottom line.
Air New Zealand reported an annual net profit after tax of NZD$71 million (USD$56.9 million) down from NZD$81 million a year ago.
Weakness in the European and Japanese travel markets, along with a doubling in the price of jet fuel in the past three years have pressured Air New Zealand's bottom line.
It boosted its annual profit improvement target to NZD$250 million by 2015, from NZD$195 million stated six months ago.
The carrier has a near 20 percent stake in Australian carrier Virgin Australia, with whom it has a commercial alliance, to combat aggressive competition from Qantas and its low cost offshoot Jetstar on routes between the two countries.
Air NZ chief executive Rob Fyfe is leaving at the end of the year and will be replaced by the current group manager international, Christopher Luxon.
Air New Zealand is one of five state owned assets, in which the New Zealand government is planning to sell minority stakes to raise up to NZD$7 billion so it can return to a budget surplus by 2015.
However, the government has said Air NZ will likely be one of the last sales and will be dependent on market conditions.