The shares climbed 8.4% to 97c after Air NZ announced improved normalised earnings of $91 million for the year ended June, up 21% on the $75 million reported in the previous corresponding period.
Normalised earnings have become a feature of the June reporting season. In the case of Air NZ, the normalised earnings are before tax but exclude the effects of currency hedging.
Earnings before interest, tax, depreciation and amortisation (ebitda) rose 19% to $506 million in the period, up from $425 million in the pcp and reported profit fell 12.3% to $71 million from $81 million in the pcp.
A final dividend of 3.5c per share was declared, taking the total dividend to 5.5cps.
Chairman John Palmer said the company was well positioned to continue the growth trajectory that it was pursuing until 2008 when the world was gripped by financial crisis.
Chief executive Rob Fyfe said Air NZ had delivered the most consistent and best relative financial performance of any Australasian airline over the past three years, yet was far from achieving its potential.
"Air NZ has built a solid foundation over the past three years to further strengthen its competitive position and comparative financial performance."
The company was ahead of the targets it had set following the implementation of a broad suite of performance improvement measures, he said.
In the domestic market, Air NZ had continued to expand its network, grow its fleet and improve productivity.
Despite the exit of Pacific Blue from the domestic market, fuel costs 60% higher than five years ago and airport charges increasing by 112% ($91 million) over the same period, Air NZ's average domestic fares decreased, Mr Fyfe said.
"If airport charges had not risen, we could have lowered fares even further for our customers."
The move to strengthen Air NZ's Australasian position by developing a closer, more effective relationship with Virgin Australia was well advanced, he said.
Forsyth Barr broker Peter Young said that while Air NZ faced ongoing challenges, it had emerged in great shape.
The board had the confidence to outline profit guidance for its normalised earnings to more than double.
"A key source of profit improvement is coming through the company's long-haul routes and the operational and fleet improvements that have been implemented in 2012."
Forsyth Barr's discounted cash flow (DCF) valuation was $1.49 a share, which was also in line with Air NZ's net tangible asset (NTA) valuation of $1.33.
"We expect Air NZ's share price to increase towards $1.10 in the near term and reiterate our buy recommendation," Mr Young said.
