Air New Zealand is picking its total capacity will increase a further 7% during its second-half trading, driven by growth in the domestic, US and Asian markets.
However, analysts are exercising some caution, picking increasing airline competition will be chasing hard on Air New Zealand's heels through 2016 and into 2017.
Airline chairman Tony Carter described the result as "stellar performance'', saying it was driven by exceptionally strong passenger revenue growth, the network's 16% capacity growth, substantially lower jet fuel prices, plus from leveraging strong economies of scale and efficiencies from its fleet simplification programme.
Air New Zealand shares were up only slightly at $2.88 after the announcement.
Forsyth Barr broker Suzanne Kinnaird said it was a "strong'' first-half result, driven by lower fuel costs and increased passenger demand.
"We see scope for further near-term positive earnings revisions, should fuel prices stay lower for longer, but at the same time greater competitive threats remain through the medium term,'' she said.
Craigs Investment Partners broker Peter McIntyre said Air New Zealand "comfortably beat'' its earlier guidance, largely driven by lower-than-expected fuel prices.
"Our initial view is that the cautious guidance is warranted and things such as fuel, foreign exchange and competition activity will need to fall in Air New Zealand's favour for the first-half run rate to be achieved [again] in the second half,'' he said.
Mrs Kinnaird expected the present "tailwinds'' would continue into second-half trading and brokers would likely need to make earnings upgrades; while also cautioning rising competition was the "key concern'' for 2017 performance.
"Record profits have been supported by the strong cash-flow generation, which has been used to acquire rather than lease new aircraft,'' she said.
For ANZ's full-year outlook, Mr Carter said based on current market conditions and assuming current fuel prices and foreign exchange rates, the airline was targeting earnings before taxation for the full year of more than $800million.
"The airline's strategic focus for the second half of the year continues to be profitable growth of the network, with total capacity expected to increase approximately 7% for the second half of the financial year,'' he said.
Alongside passenger services, momentum continued in the cargo business, with revenue up 21% from increased market share on the long-haul network from New Zealand, with strong demand from North America, Australia and Asia.
Air New Zealand's 25.9% stake in Virgin Australia, plus its share of Christchurch Engine Centre's earnings, contributed respectively $15million and $10million for the period.
Chief executive Christopher Luxon said the airline's expansion in the domestic market drove passenger demand up 10% in the period.
At the same time, the Tasman and Pacific Island markets continued to perform strongly.
On the international long-haul network the airline launched Houston and Buenos Aires routes in December and in June starts a seasonal service to Vietnam.
Air New Zealand
Six months trading to December.-
• Sales revenue up 12% to $2.69billion.
• Passenger revenue up 16% to $2.3billion.
• Group capacity up 16%; 84.4% load factor.
• Earnings before taxation up 132% to $457million.
• After-tax profit up 154% to $338million.
• Operating cash flow up 43% to $541million.
• Dividend up 54% to 10c. Source: Air NZ
