Air New Zealand 2017 Interim Results Announcement

Half Year Results22 February 2017AIRIndustrials

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Media release
23 February 2017

Air New Zealand announces second largest interim result
and maintains strong dividend

Interim highlights

 Earnings before taxation of $349 million, includes a $22 million benefit from other significant items
1

 Net profit after taxation of $256 million
 Operating revenue of $2.6 billion
 8.1 million passengers carried during the period
 Capacity increased 7.1%
 Operating cash flow of $376 million
 Strong cash position of $1.3 billion
 Three additional Boeing 787-9s delivered during the period, bringing the total in the fleet to nine
 Board approves fully imputed interim dividend of 10.0 cents per share, consistent with the prior period
dividend

Air New Zealand has today announced earnings before taxation for the first six months of the 2017 financial
year of $349 million, compared to $457 million in the prior year - the second highest result for an interim period
in the airline’s history. The result included a $22 million gain related to other significant items
1
. Net profit after
taxation was $256 million.

Chairman Tony Carter described the interim profit as an impressive result in the face of unprecedented
competitive capacity into the New Zealand market.

The Board has declared a fully imputed interim dividend of 10.0 cents per share, which is consistent with the
prior period.

“Based on the strength of the result, and the airline’s financial position, future capital commitments and trading
environment, the Board felt it appropriate to maintain the level of the interim dividend,” says Mr Carter. The
interim dividend will be paid on 17 March 2017 to investors on record as of the close of business on 10 March
2017.

Chief Executive Officer Christopher Luxon says that the swift response from the Air New Zealand team, focused
on strong cost discipline and leveraging efficiencies within the operations, helped to ease some of the revenue
pressure from new competitors and was a major driver of the strong result. Lower fuel prices were a benefit to
operating costs in the period, but the positive fuel impact was partially offset by adverse changes in foreign
exchange.

1
Other significant items relate to the divestment of the remaining interest in Virgin Australia.

“Our team responded to the challenge and I want to extend my thanks to our people for their agility and
dedication to the changing competitive environment. We modified our capacity plans, accelerated the exit of
older aircraft and made sure we were managing our costs well. All these actions and our investments of recent
years really made the difference as we adjusted to a different competitive environment in New Zealand,” says
Mr Luxon.

The airline’s strategy of diversifying its network across the Pacific Rim and throughout New Zealand has proven
successful, with strong performances from both the Houston and Buenos Aires routes in their first year of
operation. The airline has also worked to increase awareness of its long-haul capabilities in the Australian
market, with the launch of a “Better Way to Fly” campaign starring Dave the Goose.

Mr Luxon acknowledges the key role of the airline’s alliance partnerships in providing support and stability during
this period of heightened competition. “The strength of our revenue share alliances with leading airlines across
the Pacific Rim, as well as strategic codeshare relationships have allowed us to build market positions that are
more resilient and profitable,” Mr Luxon says. Together with its partners, the airline brings approximately 45
percent of inbound visitors to New Zealand.

The domestic network is benefiting from increased tourism to New Zealand, continued strength in the economy
and the roll out of the airline’s new schedule on the jet and regional routes which is supported by a modern and
efficient fleet.

The airline continues to make significant investments to sustain long-term value for its customers, employees
and shareholders. Upgrading the customer experience continued in the period, with Queenstown, Nadi and
Wellington Regional all unveiling new look lounges in the past six months as part of a multi-year programme,
with the airline spending in excess of $100 million.

Air New Zealand forecasts its total future aircraft capital expenditures through to 2021 will be approximately $1.6
billion. In the period, Air New Zealand received three additional Boeing 787-9 Dreamliners, bringing the total to
nine. The airline also completed the exit from service of its Beech 1900D aircraft and will exit the last Boeing
767 in March 2017. To support future capacity growth, the company will lease one additional Boeing 787-9
Dreamliner aircraft to join the fleet in the 2019 financial year.

Outlook

Commenting on the outlook Chairman Tony Carter says, “As we look to the second half of the financial year, we
expect that the revenue environment will improve from the first half of the year. However, higher jet fuel prices
will be a headwind.”

Based on the current market environment and expectations for the average jet fuel price in the second half of
the year of US$65 per barrel, the airline is targeting 2017 earnings before taxation to be in the range of $475 to
$525 million
2
.

____________________________________

Ends

Issued by Air New Zealand Public Affairs ph +64 21 747 320

2
Outlook for earnings before taxation includes the $22 million gain related to the divestment of the remaining interest in Virgin Australia and the
airline’s share of earnings in associates.

---

2017
REPORT
INTERIM
FINANCIAL

2
Air New Zealand Group
Chairman and Chief Executive Officer’s Report
Contents:
Chairman and Chief
Executive Officer’s Report 2
Financial Commentary 4
Change in Profitability 6
Condensed Interim
Financial Statements 7
Independent Review Report 15
For the first six months
of the 2017 financial year,
Air New Zealand’s earnings
before taxation were
$349 million.
Net profit after taxation was $256 million.
Operating cash flow was $376 million.
Left to right: Christopher Luxon Chief Executive Officer, Tony Car ter Chairman

Earnings before taxation in the first six
months of the 2017 financial year was
$349 million, which included a $22 million
gain related to other significant items
1
. The
result compares to $457 million in the prior
period. Passenger revenue was the main
driver of the decline, as a significant level of
new competitors entered the New Zealand
market in the period. Helping to mitigate the
revenue pressure was a strong focus on cost
improvement across the organisation. Lower
fuel prices were a benefit to operating costs
in the period, but were partially offset by the
adverse impact of foreign exchange.
The last six months saw unprecedented
levels of international carriers adding new
services to New Zealand. As expected, the
change in the competitive landscape in a
relatively short period of time has impacted
our airline’s profitability when compared
to the prior year. We responded swiftly, by
adjusting our capacity plans and accelerating
the exit of older aircraft, together with
increased productivity and efficiencies from
our fleet. The strategic initiatives driving us
over the past few years – diversifying our
network, simplifying our fleet, investing in
our customers and employees – have given
us the tools to compete effectively against
the competition.
Our financial position remains robust.
Gearing was 55.9 percent, an expected
increase from 48.6 percent at the end
of the 2016 financial year, reflecting the
timing of the purchase of new aircraft and
the payment of a 2016 special dividend in
the period. Cash flow from operations was
strong at $376 million and net cash on
hand was $1.3 billion.
The Board has declared a fully imputed
interim dividend of 10.0 cents per
share, which is consistent with the prior
period. In respect of the dividend, the
Board considers the airline’s financial
strength, capital commitments and trading
environment in determining the appropriate
level of distribution.
A key priority for our business is
developing our international markets and
positioning Air New Zealand to compete
effectively against some of the largest
airlines in the world. Our sales teams are
talented at developing deep relationships
with our corporate and trade partners. We
also use our own unique style of marketing
to raise the profile of Air New Zealand in
some of the larger markets we operate in
– with great effect.
One recent example of our approach to
brand awareness and market development
was the launch of our Australia long-haul
campaign – “a Better Way to Fly.” The
campaign, which stars Dave the Goose, aims
to capture a greater share of the Australian
long-haul traffic to both North and South
America via our Auckland hub. While still
in the early days, feedback from customers
in Australia has been very positive, and we
see a big opportunity in further leveraging
our strong reputation in Australia to
convince customers that Air New Zealand
is the better way to fly long-haul.
We continue to develop a simplified and
modern fleet. In the first six months of
the year, we welcomed three additional
Boeing 787-9 Dreamliners, bringing the
total to nine with a further four still to
arrive, as well as additional A320 and
ATR aircraft. The last of the Beech 1900D
aircraft exited service in August, and we
are preparing to retire the remaining two
Boeing 767 aircraft in March 2017.
The customer feedback to our new fleet
has also been very positive. To that end,
we have commenced with refurbishing
the interiors of our Boeing 777-300 aircraft,
as part of our commitment to providing our
customers with a consistent, world-class
product they can depend upon regardless
of their destination. Looking forward, we
forecast aircraft-related capital expenditures
of approximately $1.6 billion through to
2021, with the majority being spent in the
2018 and 2019 financial years.
Finally, successfully navigating the
competition and coming up with innovative
solutions to engage our customers is fully
reliant on the engagement of our people and
our ability to recruit, develop and keep them
inspired. Our connection to our communities
is strengthened by the commitment of our
people to the success of both our airline
and New Zealand. Investing in our people
continues to be a key pillar of our strategy.
Outlook
As we look to the end of the financial
year, we expect the revenue environment
will improve from the first half of the
year. However, higher jet fuel prices will
be a headwind.
Based on the current market environment
and our expectations for the average jet
fuel price in the second half of the year of
US$65 per barrel, we are targeting 2017
earnings before taxation to be in the range
of $475 to $525 million
2
.
Tony C ar ter
Chairman
Christopher Luxon
Chief Executive Officer
23 February 2017
32017 INTERIM FINANCIAL REPORT
“ Our second highest interim
result in the history
of the airline.”
Earnings before
taxation
$
349m
2
Operating
cash flow
$
376m
Net cash
position of
$
1.3b
Interim dividend
declared of
10.0
cps
1
Other significant items relate to the divestment of the remaining interest in Virgin Australia.
2
Includes the $22 million gain related to the divestment of the remaining interest in Virgin Australia, as well as the share of
earnings in associates.

Air New Zealand’s earnings before
taxation for the first six months of the
2017 financial year were $349 million,
a decrease of 24 percent on the prior
period. The result included a $22 million
gain related to other significant items.
Net profit after taxation was $256 million.
This interim result saw a decline in
Passenger Revenue per Available Seat
Kilometre (RASK) due to a challenging
competitive environment, which was offset
by increased capacity. The benefit of lower
fuel cost in the period was partially offset
by unfavourable foreign exchange.
Revenue
Operating revenue decreased by
$114 million to $2.6 billion, a decrease
of 4.2 percent on the prior period.
Excluding the impact of foreign exchange,
operating revenue decreased 3.0 percent.
Passenger revenue decreased by $93
million to $2.2 billion, a 4.0 percent
decline compared with the prior period.
Excluding the impact of foreign exchange,
passenger revenue decreased by 3.1
percent. Capacity (Available Seat
Kilometres, ASK) growth of 7.1 percent
reflected the annualisation of new
international services and up-gauging to
larger aircraft, including growth in the
domestic network.
Demand (Revenue Passenger Kilometres,
RPK) lagged slightly behind capacity
growth at 5.5 percent, resulting in a
decreased load factor of 83.1 percent.
RASK for the Group declined 10.4
percent, due to the commencement of
new competition. Excluding the adverse
impact of foreign exchange, RASK
declined 9.3 percent.
International long-haul capacity increased
8.8 percent due to the full six month
impact of new international routes to
Houston and Buenos Aires, as well as the
commencement of seasonal international
routes to Ho Chi Minh City and Osaka.
Demand (RPK) on international long-haul
routes increased 7.3 percent, with load
factor down by 1.2 percentage points to
84.9 percent. International long-haul RASK
decreased by 14.3 percent reflecting
the increased competitive environment.
Excluding the adverse impact of foreign
exchange, RASK declined by 13.2 percent.
Short-haul capacity grew 5.1 percent
during the period, driven by increased
frequency on New Zealand domestic
main trunk routes including Auckland
to Queenstown and larger aircraft on
a number of Tasman, Pacific Island and
regional routes. Demand grew by 3.2
percent, with load factor decreasing 1.5
percentage points to 80.9 percent. Short-
haul RASK declined 6.3 percent, and
excluding the adverse impact of foreign
exchange, declined 5.9 percent.
Cargo revenue was $171 million, a decrease
of $16 million or 8.6 percent. Excluding
the adverse impact of foreign exchange,
cargo revenue decreased 4.3 percent.
Volume growth on new routes was more
than offset by yield pressure from North
American and Asian carriers.
Contract services and other revenue was
$198 million in the period, a decrease
of $5 million or 2.5 percent on the prior
period, reflecting lower external engineering
revenue. Excluding the adverse impact of
foreign exchange, contract services and
other revenue declined 0.5 percent.
Expenses
Operating expenditure improved by
$1 million on the prior period. Foreign
exchange had a $33 million adverse
impact on operating expenses. Excluding
foreign exchange related movements,
operating expenditure improved 1.8 percent
on a 7.1 percent increase in capacity.
Costs per ASK improved 6.7 percent
on the prior period to 8.81 cents per
ASK. Excluding the impact of FX,
Costs per ASK improved 8.5 percent.
The largest contributor to improved
operating costs were efficiencies
achieved throughout the cost base.
Economies of scale and efficiencies
contributed $113 million in savings.
Labour costs were $623 million for the
period, an increase of $4 million or 0.6
percent. Excluding the impact of foreign
exchange, labour costs increased 1.1
percent on a 7.1 percent increase in
Operating revenue
$
2.6b
Air New Zealand Group
Financial Commentary
Dividend Record date
10 March 2017
Dividend Payment date

17 March 2017
4

capacity. Rate increases were partially
offset by productivity improvements and
lower incentive provisions. Headcount
increased by 533 full time equivalent
(FTE) between December 2015
and December 2016 to 10,867 FTE
employees, a 5.2 percent increase.
Fuel costs contributed to the
improvement in operating expenditure in
the period, declining by $94 million to
$390 million, or 19.4 percent. Excluding
the impact of foreign exchange, fuel
costs improved by $62 million. The cost
of fuel was 18 percent lower than the
prior period, resulting in a $92 million
benefit, which was partially offset by
$30 million related to increased volume.
Continued fleet efficiencies resulted
in fuel consumption being below the
capacity growth. The stronger NZ dollar
also resulted in the cost of fuel being
lower in NZ dollar terms by $32 million.
Aircraft operations, passenger services
and maintenance costs were $558 million,
a decrease of $3 million or 0.5 percent
on the prior period. Increased capacity,
passenger numbers and price increases
drove increased aircraft operations and
passenger services expenses, offset by
lower maintenance expenditure.
Other expenses increased by $5 million or
4.1 percent, due to lower gains on fixed asset
disposals and higher digital costs. Foreign
exchange had a $2 million favourable
impact compared to the prior period.
Depreciation, rental and lease expense
and funding costs increased by $2 million
or 0.5 percent, reflecting an increase in
aircraft depreciation due to delivery of
new aircraft, offset by lower rental and
lease expenses due to the stronger NZ
dollar and lower net finance costs due to
lower average borrowing rates.
Foreign Exchange Impact
The impact of foreign exchange rate
changes on the revenue and costs base
resulted in a net positive foreign exchange
movement of $36 million due to the
strengthening of the New Zealand dollar
against most major currencies. After
taking into account hedging movements,
overall foreign exchange had a $57 million
negative impact on the Group result
compared to the prior period.
Share of Earnings of Associates
In March 2016, Air New Zealand
ceased to apply equity accounting to its
investment in Virgin Australia. In the prior
period, the share of earnings from Virgin
Australia was $15 million. The share of
equity earnings of associates for the six
months to December 2016 was comprised
solely of earnings of $10 million from
Christchurch Engine Centre, which was
consistent with the prior period.
Other Significant Items
The remaining 2.6% shareholding in
Virgin Australia held at 30 June 2016
was sold by October 2016 through a
series of off-market transactions. The
divestment resulted in a favourable
impact on earnings of $22 million.
Cash and Financial Position
Net cash at 31 December 2016 was
$1.3 billion, a decrease of $306 million
from 30 June 2016, with the operating
cash flow being offset with the payment
of dividends and capital investment in
aircraft during the period.
The Group’s operating cash flows was
strong at $376 million, which included
the impact from a one-off prepayment for
engine maintenance of $58 million.
Net gearing, including capitalised operating
leases, increased 7.3 percentage points
to 55.9 percent as at 31 December 2016
from 48.6 percent as at 30 June 2016.
This was due to the timing of the purchase
of new aircraft and payment of the 2016
special dividend during the period.
Capacit y (ASKs)

7.1
%
5
Unit cost improves to
8.81
cents per ASK
2017 INTERIM FINANCIAL REPORT
10.0
DEC
2016
3.0
DEC
2012

Earnings before taxation
500
400
300
200
100
0
$ million
349
DEC
2016

Interim dividend (declared)
12
10
8
6
4
2
0
Cents per share

Operating cash flow
600
400
200
0
$ million
197
DEC
2014
141
DEC
2012
376
DEC
2016
378
DEC
2014
300
DEC
2013
343
DEC
2012
DEC
2013
4.5
6.5
DEC
2014
457
DEC
2015
198
DEC
2013
541
DEC
2015
10.0
DEC
2015

December 2015 earnings before taxation
Passenger capacity
$98m
- Capacity increased by 7.1 percent from growth across the network due to
the annualisation impact of new international routes, increased widebody
services across the Tasman and Pacific Islands and additional domestic
A320’s and ATR72-600’s
Passenger RASK
- $ 170 m
- Overall Revenue per Available Seat Kilometre (RASK) reduced during
a period of significant market capacity growth. RASK declined 9.3 percent
excluding FX (10.4 percent including FX). Yield declined 8.1 percent
excluding FX as loads declined by 1.3 percentage points to 83.1 percent
- Long-haul RASK declined by 13.2 percent excluding FX (14.3 percent
including FX). Yields declined 12.0 percent excluding FX while loads
declined reflecting capacity growth
- Short-haul RASK declined by 5.9 percent excluding FX (6.3 percent
including FX). Yields declined by 4.2 percent excluding FX combined
with lower loads
Cargo, contract services and other revenue
-$9m
- Reduction in cargo revenue due to lower yields arising from increased
competition offset by improved cargo volumes and lower external
engineering revenue
Labour
- $7m
- Increased activity (net of improved productivity) arising from capacity
growth and general rate increases offset by lower incentive provisions
Fuel
$62m
- The average cost of fuel decreased 18 percent compared to the prior
year. Consumption increased by 6.3 percent due to an increase in
capacity offset by fleet efficiencies
Maintenance
$12m
- Reduced maintenance following exit of Beech 1900D and B763 aircraft
Aircraft operations and passenger services
-$26m
- Increased activity and pricing increases offset by productivity improvements
Other expenses
- $7m
- Lower gains on sale of fixed assets and increased digital costs due to
additional activity
Depreciation, lease and funding costs
- $ 11m
- Increase in depreciation reflecting the delivery of new aircraft offset by
reduced funding costs
Net impact of foreign exchange movements
- $ 57m
- Movement in foreign exchange hedging offset by the net impact of
currency movements on revenue and costs
Virgin Australia
$7m
- Gain on sale of the remaining interest in Virgin Australia ($22 million)
offset by the prior period share of associate earnings ($15 million)
December 2016 earnings before taxation
* The numbers referred to in the Financial Commentary on the previous page have not isolated the impact of foreign exchange.
Change in Profitability
6
Air New Zealand Group
$ 457m
The key changes in profitability, after isolating the impact of foreign exchange movements,
are set out in the table below*:
$349m

NOTES
6 MONTHS TO
31 DEC 2016
$M
6 MONTHS TO
31 DEC 2015
$M
Operating Revenue
Passenger revenue
Cargo
Contract services
Other revenue
2,215
171
80
118
2,308
187
85
118
Operating Expenditure
Labour
Fuel
Maintenance
Aircraft operations
Passenger services
Sales and marketing
Foreign exchange (losses)/gains
Other expenses
3
2,584
(623)
(390)
(147)
(278)
(133 )
(173 )
(14)
(128 )
2,698
(619)
(484)
(168)
(267)
(126 )
(179 )
79
(123 )
(1,886)
(1, 887)
Operating Earnings (excluding items below)
Depreciation and amortisation
Rental and lease expenses
698
(242)
(118 )
811
(229)
(123 )
Earnings Before Finance Costs, Associates, Other Significant Items and Taxation
Finance income
Finance costs
Share of earnings of associates (net of taxation)
2(a)
338
25
(46)
10
459
27
(54)
25
Earnings Before Other Significant Items and Taxation
Other significant items
2(b)
327
22
457
-
Earnings Before Taxation
Taxation expense
349
(93)
457
(119 )
Net Profit Attributable to Shareholders of Parent Company256
338
Per Share Information:
Basic earnings per share (cents)
Diluted earnings per share (cents)
Interim dividend declared per share (cents)
Net tangible assets per share (cents)
22.8
22.6
10.0
169
30 .1
29.6
10.0
175
Statement of Financial Performance (unaudited)
For the six months to 31 December 2016
These condensed financial statements have not been audited. They have been the subject of review by the auditor pursuant to NZ SRE 2410
Review of Financial Statements Performed by the Independent Auditor of the Entity, issued by the External Reporting Board. The accompanying
notes form part of these financial statements.
72017 INTERIM FINANCIAL REPORT

NOTES

SHARE
CAPITAL
$M

HEDGE
RESERVES
$M
FOREIGN
CURRENCY
TRANSLATION
RESERVE
$M

GENERAL
RESERVES
$M

TOTAL
EQUITY
$M
Balance as at 1 July 2016 2,252 (9) (15) (120 ) 2 ,108
Net profit for the period
Other comprehensive income for the period
-
-
-
73
-
1
256
(2)
256
72
Total Comprehensive Income for the Period- 731 254 328
Transactions with Owners:
Equity-settled share-based payments
Equity settlements of long-term
incentive obligations
Dividends on Ordinary Shares

2(d)
7
2
(9)
-
-
-
-
-
-
-
-
-
(393)
2
(9)
(393)
Total Transactions with Owners (7) - - (393) (400)
Balance as at 31 December 2016
2(e)
2,245 64 (14)(259) 2,036

NOTE

SHARE
CAPITAL
$M

HEDGE
RESERVES
$M
FOREIGN
CURRENCY
TRANSLATION
RESERVE
$M

GENERAL
RESERVES
$M

TOTAL
EQUITY
$M
Balance as at 1 July 2015
2,286 74 (44) ( 3 51) 1,965
Net profit for the period
Other comprehensive income for the period
-
-
-
(68)
-
(32)
338
(4)
338
(104)
Total Comprehensive Income for the Period
- (68) (32) 334 234
Transactions with Owners:
Equity-settled share-based payments
Equity settlements of long-term
incentive obligations
Dividends on Ordinary Shares
Share of equity accounted associates’
reserves (net of taxation)
2(d)
2

(21)
-
-
-

-
-
-
-
-
-
-
-
-
(107)
(2)
2
(21)
(107)
(2)
Total Transactions with Owners
(19) - - (109) (128 )
Balance as at 31 December 2015
2,267 6 (76)(126 ) 2,071
These condensed financial statements have not been audited. They have been the subject of review by the auditor pursuant to NZ SRE 2410,
issued by the External Reporting Board. The accompanying notes form part of these financial statements.
9
Statement of Changes in Equity (unaudited)
For the six months to 31 December 2016
2017 INTERIM FINANCIAL REPORT

These condensed financial statements have not been audited. They have been the subject of review by the auditor pursuant to NZ SRE 2410,
issued by the External Reporting Board. The accompanying notes form part of these financial statements.

NOTES
31 DEC 2016
$M
30 JUN 2016
$M
Current Assets
Bank and short term deposits
Trade and other receivables
Inventories
Derivative financial assets
Investment in quoted equity instruments
Other assets
2(a)
1,288
375
92
115
-
42
1,594
373
103
70
22
177
Total Current Assets1,912
2,339
Non-Current Assets
Trade and other receivables
Property, plant and equipment
Intangible assets
Investments in other entities
Other assets
2(a)
130
4,859
134
83
173
61
4,485
127
79
160
Total Non-Current Assets5,379
4 , 912
Total Assets7, 291
7, 251
Current Liabilities
Trade and other payables
Revenue in advance
Interest-bearing liabilities
Derivative financial liabilities
Provisions
Income taxation
Other liabilities

2(c)

470
1,081
361
4
87
10
216

453
1 ,111
464
65
87
54
237
Total Current Liabilities2,229
2,471
Non-Current Liabilities
Revenue in advance
Interest-bearing liabilities
Derivative financial liabilities
Provisions
Other liabilities
Deferred taxation
2(c)
186
2 , 412
-
183
24
221

161
2,10 3
4
216
24
164
Total Non-Current Liabilities3,026
2,672
Total Liabilities5,255
5 ,14 3
Net Assets2,036
2,10 8
Equity
Share capital
Reserves
2(d)
2(e)
2,245
(209)
2,252
(14 4)
Total Equity2,036
2,10 8

Tony Carter, CHAIRMAN Jan Dawson, DEPUTY CHAIRMAN
For and on behalf of the Board, 23 February 2017.
10
Statement of Financial Position (unaudited)
As at 31 December 2016
Air New Zealand Group

These condensed financial statements have not been audited. They have been the subject of review by the auditor pursuant to NZ SRE 2410,
issued by the External Reporting Board. The accompanying notes form part of these financial statements.

NOTES
6 MONTHS TO
31 DEC 2016
$M
6 MONTHS TO
31 DEC 2015
$M
Cash Flows from Operating Activities
Receipts from customers
Payments to suppliers and employees
Income tax paid
Interest paid
Interest received
2,568
(2,090)
(88)
(39)
26
2,719
(2,045)
(107)
(50)
29
Rollover of foreign exchange contracts*
377
(1)
546
(5)
Net Cash Flow from Operating Activities376
5 41
Cash Flows from Investing Activities
Disposal of property, plant and equipment, intangibles and assets held for resale
Disposal of investments in quoted equity instruments
Interest-bearing asset receipts
Distribution from associates
Acquisition of property, plant and equipment and intangibles
Acquisition of quoted equity instruments
Interest-bearing asset payments
2(b)
2(b)
31
68
137
4
(639)
(23)
(13 )
26
-
-
5
(695)
-
(4)
Net Cash Flow from Investing Activities(435)
(668)
Cash Flows from Financing Activities
Interest-bearing liabilities drawdowns
Equity settlements of long-term incentive obligations
Interest-bearing liabilities payments
Rollover of foreign exchange contracts*
Dividends on Ordinary Shares
2(d)
7
512
(9)
(303)
(35)
(412)
442
(21)
(171)
68
(112 )
Net Cash Flow from Financing Activities(247)
206
(Decrease)/Increase in Cash and Cash Equivalents
Cash and cash equivalents at the beginning of the period
(306)
1,594
79
1,321
Cash and Cash Equivalents at the End of the Period1,288
1,400
Reconciliation of Net Profit Attributable to Shareholders to Net Cash Flows
from Operating Activities:
Net profit attributable to shareholders
Plus/(less) non-cash items:
Depreciation and amortisation
Gain on disposal of property, plant and equipment, intangibles and assets held for resale
Share of earnings of associates
Changes in fair value of investments in quoted equity instruments
Foreign exchange gains
Other non-cash items
2(a)
2(b)
256
242
-
(10)
(22)
-
4
338
229
(8)
(25)
-
(3)
2
Net working capital movements:
Assets
Revenue in advance
Deferred foreign exchange gains
Liabilities
470
(57)
(5)
(1)
(31)
533
2
33
(5)
(22)
(94)
8
Net Cash Flow from Operating Activities376
5 41
*Relates to gains/losses on rollover of foreign exchange contracts that hedge exposures in other financial periods.
11
Statement of Cash Flows (unaudited)
For the six months to 31 December 2016
2017 INTERIM FINANCIAL REPORT

1. Financial Statements
The parent company, Air New Zealand Limited, is a profit-oriented entity, domiciled in New Zealand, registered under the Companies
Act 1993 and listed on the New Zealand and Australian Stock Exchanges. The Company is a FMC Reporting Entity under the Financial
Markets Conduct Act 2013 and the Financial Reporting Act 2013.
Air New Zealand prepares its condensed Group interim financial statements (“financial statements”) in accordance with New Zealand
Generally Accepted Accounting Practice (“NZ GAAP”). NZ GAAP consists of New Zealand equivalents to International Financial
Reporting Standards (“NZ IFRS”) and other applicable financial reporting standards as appropriate to profit-oriented entities. These
financial statements comply with NZ IFRS and International Financial Reporting Standards (“IFRS”).
The financial statements should be read in conjunction with the Annual Report for the year ended 30 June 2016.
The accounting policies and computation methods used in the preparation of the financial statements are consistent with those used as
at 30 June 2016 and 31 December 2015. Where necessary, comparative information has been reclassified to achieve consistency in
disclosure with the current period.
These financial statements have not been audited. The financial statements comply with NZ IAS 34: Interim Financial Reporting and
IAS 34: Interim Financial Reporting and have been the subject of review by the auditor, pursuant to NZ SRE 2410 Review of Financial
Statements Performed by the Independent Auditor of the Entity, issued by the External Reporting Board.
2. General Disclosures
Group composition
(a) The Group’s investment in associates relates to a 49% interest in Christchurch Engine Centre (“CEC”). The Group recognised a
share of equity accounted earnings of $10 million for CEC (31 December 2015: earnings of $10 million for CEC and earnings of
$15 million for Virgin Australia Holdings Limited (“Virgin Australia”)). On 30 March 2016, the Group ceased to apply the equity
method of accounting to the investment in Virgin Australia and the investment was classified as an Investment in quoted equity
instruments (refer below for further details). The investment in joint ventures relates to a 50% interest in 11Ants Analytics Group
Limited and 51% interest in ANZGT Field Services LLC.
Other significant items
(b) From 30 March 2016, the investment in Virgin Australia was stated at fair value with changes in fair value being recognised through
earnings. In August 2016, the Group subscribed to a one for one rights issue (a further 102,889,330 shares at A$0.21 per share).
Since 30 June 2016, all remaining shares have been sold (205,778,660 shares at a weighted average price of A$0.32 per share).
The fair value movement of these shares from 30 June 2016 was $22 million.
Interest-bearing liabilities
(c) Interest-bearing liabilities are recognised initially at fair value and subsequently measured at amortised cost. The fair value of
interest-bearing liabilities as at 31 December 2016 is $2,725 million (30 June 2016: $2,594 million). All secured borrowings are
secured over aircraft or aircraft related assets and are subject to floating interest rates. Finance lease liabilities are secured over
aircraft or aircraft related assets and are subject to both fixed and floating interest rates. Fixed interest rates ranged from 0.7% to
3.4% in the six months to 31 December 2016 (six months to 31 December 2015: 0.7% to 3.4%).
On 28 October 2016 Air New Zealand issued $50 million of unsecured, unsubordinated fixed rate bonds, included within “Interest-
bearing liabilities” in the Statement of Financial Position. The bonds have a maturity date of 28 October 2022 and an interest rate
of 4.25% payable semi-annually. Unsecured bonds of $150 million with an interest rate of 6.9% matured on 15 November 2016.
Share capital
(d) During the six months ended 31 December 2016 the Group funded the purchase on-market of 4,433,313 shares for $9 million
(31 December 2015: 7,397,852 shares for $21 million). The shares were used to settle obligations under long-term incentive plans.
The total cost of the purchase including transaction costs has been deducted from Share Capital.
Hedge reserves
(e) As at 31 December 2016, $70 million of gains (30 June 2016: $2 million of losses) were held in the cash flow hedge reserve and
$6 million of losses (30 June 2016: $7 million of losses) were held in the costs of hedging reserve. These reserves are combined
within the Statement of Movements in Equity as “Hedge reserves”.
12
Condensed Notes to the Financial Statements (unaudited)
As at and for the six months to 31 December 2016
Air New Zealand Group

3. Segmental Information
Air New Zealand operates predominantly in one segment, its primary business being the transportation of passengers and cargo on an
integrated network of scheduled airline services to, from and within New Zealand. Resource allocation decisions across the network are
made to optimise the consolidated Group’s financial result.

6 MONTHS TO
31 DEC 2016
$M
6 MONTHS TO
31 DEC 2015
$M
Analysis of revenue by geographical region of original sale
New Zealand
Australia and Pacific Islands
United Kingdom and Europe
Asia
America
1,582
315
135
224
328
1,587
324
161
246
380
Total Operating Revenue2,584
2,698
The principal non-current asset of the Group is the aircraft fleet which is registered in New Zealand and employed across the worldwide
network. Accordingly, there is no reasonable basis for allocating the assets to geographical segments.
4. Capital Commitments

31 DEC 2016
$M
30 JUN 2016
$M
Aircraft and engines
Other assets
1,797
14
2,210
12
1, 811
2,222
Commitments as at reporting date include three Boeing 787-9 aircraft (delivery from 2017 to 2018 calendar years), four Airbus A321
NEOs and nine Airbus A320 NEOs (delivery from 2017 to 2021 calendar years) and fourteen ATR72-600s (delivery from 2017 to 2020
calendar years).
5. Operating Lease Commitments

31 DEC 2016
$M
30 JUN 2016
$M
Aircraft Leases Payable*
Not later than 1 year
Later than 1 year and not later than 5 years
Later than 5 years
184
458
228
184
409
163
870
756
Property Leases Payable
Not later than 1 year
Later than 1 year and not later than 5 years
Later than 5 years
42
112
76
40
112
75
230
227
*Includes lease commitments for five A320/321 NEO aircraft due to be delivered from 2017 to 2018 calendar years and one Boeing 787-9
aircraft, for which a lease agreement was signed in February 2017, due to be delivered in the 2018 calendar year.
13
Condensed Notes to the Financial Statements (unaudited)
As at and for the six months to 31 December 2016
2017 INTERIM FINANCIAL REPORT

6. Contingent Liabilities
All significant legal disputes involving probable loss that can be reliably estimated have been provided for in the financial statements.
There are no contingent liabilities for which it is practicable to estimate the financial effect.
In January 2017 the Group agreed to settle a class action compensation claim in the United States made in respect of allegations
that Air New Zealand along with other airlines acted anti-competitively in respect of fares and surcharges on trans-Pacific routes.
Air New Zealand does not admit to being part of any anti-competitive activity. The settlement amount of US$400k plus costs was fully
provided for within the financial statements.
Allegations of anti-competitive conduct in the air cargo business in Hong Kong and Singapore were the subject of proceedings by the
Australian Competition and Consumer Commission (“ACCC”). Following a defended hearing, the Federal Court released its decision in
October 2014, finding in favour of Air New Zealand. The ACCC appealed the decision and the appeal was heard in August 2015 finding
in favour of the ACCC. The High Court of Australia has granted leave to appeal the latest decision and the appeal will be heard in early
M a rc h 2 017.
In the event that a Court determined that Air New Zealand had breached competition laws, the Group would have potential liability for
pecuniary penalties. No other significant contingent liability claims are outstanding at balance date.
Outstanding letters of credit and performance bonds total $33 million (30 June 2016: $33 million).
The Group has a partnership agreement with Pratt and Whitney in which it holds a 49% interest in the CEC. By the nature of the
agreement, joint and several liability exists between the two parties. Total liabilities of the CEC are $111 million (30 June 2016:
$68 million).
7. Dividends
On 22 February 2017, the Board of Directors declared an interim dividend of 10.0 cents per Ordinary Share payable on 17 March
2017 to registered shareholders at 10 March 2017. The total dividend payable will be $112 million. Imputation credits will be attached
and supplementary dividends paid to non-resident shareholders. The dividend has not been recognised in the December 2016 interim
financial statements.
A final dividend in respect of the 2016 financial year of 10.0 cents per Ordinary Share, and a special dividend of 25.0 cents per Ordinary
Share was paid on 19 September 2016. Imputation credits were attached and supplementary dividends paid to non-resident shareholders.
The dividend reinvestment plan is currently suspended.
14
Condensed Notes to the Financial Statements (unaudited)
As at and for the six months to 31 December 2016
Air New Zealand Group

Independent Review Report
To the shareholders of Air New Zealand Limited
We have reviewed the condensed Group interim financial statements of Air New Zealand Limited (“the Company”) and its subsidiaries
(“the Group”) on pages 7 to 14, which comprise the Statement of Financial Position as at 31 December 2016, and the Statement of Financial Performance,
Statement of Comprehensive Income, Statement of Changes in Equity and Statement of Cash Flows for the six months ended on that date, and condensed
notes to the interim financial statements.
This report is made solely to Air New Zealand Limited’s shareholders, as a body. Our review has been undertaken so that we might state to
Air New Zealand Limited’s shareholders those matters we are required to state to them in a review report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone other than Air New Zealand Limited’s shareholders as
a body, for our engagement, for this report, or for the opinions we have formed.
Directors’ Responsibilities
The directors are responsible on behalf of the Group for the preparation and fair presentation of the condensed Group interim financial statements, in
accordance with NZ IAS 34: Interim Financial Reporting and IAS 34: Interim Financial Reporting and for such internal control as the directors determine is
necessary to enable the preparation of condensed Group interim financial statements that are free from material misstatement, whether due to fraud or error.
The directors are also responsible for the publication of the condensed Group interim financial statements, whether in printed or electronic form.
Our Responsibilities
The Auditor-General is the auditor of the Group pursuant to section 5(1)(f) of the Public Audit Act 2001. Pursuant to section 32 of the Public Audit Act 2001,
the Auditor-General has appointed me, Peter Gulliver, using the staff and resources of Deloitte Limited, to carry out the annual audit of the Group.
Our responsibility is to express a conclusion on the condensed Group interim financial statements based on our review. We conducted our review in
accordance with NZ SRE 2410 Review of Financial Statements Performed by the Independent Auditor of the Entity (NZ SRE 2410). NZ SRE 2410 requires
us to conclude whether anything has come to our attention that causes us to believe that the condensed Group interim financial statements, taken as a whole,
are not prepared, in all material respects, in accordance with NZ IAS 34: Interim Financial Reporting and IAS 34: Interim Financial Reporting. As the auditor of
Air New Zealand Limited, NZ SRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual financial statements.
A review of the condensed Group interim financial statements in accordance with NZ SRE 2410 is a limited assurance engagement. The auditor performs
procedures, primarily consisting of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other
review procedures. The procedures performed in a review are substantially less than those performed in an audit conducted in accordance with International
Standards on Auditing (New Zealand). Accordingly we do not express an audit opinion on the condensed Group interim financial statements.
We did not evaluate the security and controls over the electronic publication of the condensed Group interim financial statements.
In addition to this review and the audit of the Group annual financial statements, we have carried out assignments in the areas of taxation and other
assurance and non-assurance services which are compatible with the independence requirements of the Auditor-General, which incorporate the independence
requirements of the External Reporting Board. In addition to these assignments, principals and employees of our firm deal with the Group on normal terms
within the ordinary course of trading activities of the Group. These assignments and trading activities have not impaired our independence as auditor of the
Group. Other than the review and these assignments and trading activities, we have no relationship with, or interests in the Group.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed Group interim financial statements do not present fairly,
in all material respects, the financial position of the Group as at 31 December 2016 and its financial performance and its cash flows for the six months ended
on that date in accordance with NZ IAS 34: Interim Financial Reporting and IAS 34: Interim Financial Reporting.
Peter Gulliver, Partner
for Deloitte Limited
On behalf of the Auditor-General
23 February 2017
Auckland, New Zealand
15
Shareholder Enquiries
Shareholder Communication
Air New Zealand’s investor website www.airnzinvestor.co.nz
provides shareholders with information on monthly operating
statistics, financial results, stock exchange releases, corporate
governance, annual meetings, investor presentations, important
dates and contact details. Shareholders can also view webcasts
of key events from this site.
Shareholders who would like to receive electronic news updates
can register online at www.airnzinvestor.co.nz or email Investor
Relations directly on investor@airnz.co.nz.
Share Registrar
Link Market Services Limited
Level 11, Deloitte House
80 Queen Street, Auckland, 1010, New Zealand
PO Box 91976, Auckland 1142, New Zealand
Phone: (64 9) 375 5998 (New Zealand)
(61) 1300 554 474 (Australia)
Fax: (64 9) 375 5990
Email: enquiries@linkmarketservices.co.nz
Investor Relations
Private Bag 92007
Auckland 1142, New Zealand
Phone: 0800 22 22 18 (New Zealand)
(64 9) 336 2607 (Overseas)
Fax: (64 9) 336 2664
Email: investor@airnz.co.nz
Website: www.airnzinvestor.com
General Information – New Zealand Exchange Waiver
Air New Zealand and the Crown (acting through the Ministry of Business, Innovation and Employment) have agreed terms under which Air New Zealand will
provide government agencies with discounted fares. This agreement is likely to be a “Material Transaction” under the rule 9.2.2(e) of the NZX Listing Rules.
Given the Crown is a 51.91% shareholder of Air New Zealand, Air New Zealand sought (and was provided with) a waiver to enter into the transaction without the
requirement to obtain shareholder approval. This waiver was granted subject to two independent directors of the board certifying that: (i) the agreement has been
negotiated on arm’s length commercial terms; (ii) entry into the agreement is in the best interests of all shareholders (other than the Crown); and (iii) the Crown,
as the majority shareholder in Air New Zealand, has not influenced the board of directors of Air New Zealand, to enter into the agreement. Two independent
directors must confirm those same matters listed above, in any extension or renewal of the agreement.

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AIR1196 Interim Report Cover A4.indd 11/02/17 1:33 PM

---

Name of Listed Issuer:
Reporting Period6 months to 31 December 2016
Previous Reporting Period6 months to 31 December 2015
Amount $NZ'mPercentage change
Revenue from ordinary activities (including finance income)2,609 (4.3)%
Profit from ordinary activities after tax attributable to security holders256 (24.3)%
Net profit attributable to security holders256 (24.3)%
Dividend
(NZ cents)
Interim dividend*103.89
Details of interim dividend
Record Date for Interim Dividend
10-Mar-17
Payment Date for Interim Dividend
17-Mar-17
* Interim dividend was declared on 22 February 2017.
Results for announcement to the market
Amount per securityImputed amount per
security
AIR NEW ZEALAND LIMITED

Air New Zealand Limited
Preliminary Half Year Results
23 February 2017
CONTENTS
NZX Appendix 1, pursuant to NZX Listing Rule 10.3.1
ASX Half Year Results - Results for announcement to the market (Appendix 4D), pursuant to ASX Listing Rule 4.2A.3
Directors' Declaration (ASX)
Directors' Report (ASX)
NZX Appendix 7
Air New Zealand Limited
NZX Preliminary Interim Report

PRELIMINARY HALF YEAR REPORT ANNOUNCEMENT
AIR NEW ZEALAND LIMITED
Half Year Ended 31 December 2016 (referred to in this report as the "current half year")
2.1 Details of the reporting period and the previous corresponding period
2.2 Information prescribed by NZX
Refer to "Results for announcement to the market".
(a) A Statement of Financial Performance
Refer to the Interim Financial Statements.
(b) A Statement of Financial Position
Refer to the Interim Financial Statements.
(c) A Statement of Cash Flows
Refer to the Interim Financial Statements.
$NZ'm*
NZ cents
per share
Distributions recognised
Final dividend for 2016 financial year on Ordinary Shares11210.0
Special dividend for 2016 financial year on Ordinary Shares28125.0
Distributions paid
Final dividend for 2016 financial year on Ordinary Shares11810.0
Special dividend for 2016 financial year on Ordinary Shares29425.0
(f) Net tangible assets per security with the comparative figure for the previous corresponding period
CurrentPrevious
Half YearCorresponding
(NZ Cents Per Share)Half Year
Ordinary Shares169175
The dividend reinvestment plan is currently suspended.
This report is for the half year ended 31 December 2016 and should be read in conjunction with the most recent annual
financial report. Comparatives are in respect of the half year ended 31 December 2015.
2.3 The following information, which must be presented in whatever way the Issuer considers is the most clear and
helpful to users, e.g. combined with notes to the financial statements or set out separately.
(d) Details of individual and total dividends or distributions and dividend or distribution payments. The details must
include the date on which each dividend or distribution is payable and (if known) the amount per security of foreign
sourced dividends or distributions.
(e) Details of any dividend or distribution reinvestment plans in operation and the last date for the receipt of an
election notice for participation in any dividend or distribution reinvestment plan.
A final dividend in respect of the 2016 financial year of 10.0 cents per Ordinary Share, and a special dividend of 25.0 cents
per Ordinary Share was paid on 19 September 2016. Imputation credits were attached and supplementary dividends paid to
non-resident shareholders.
On 22 February 2017, the Board of Directors declared an interim dividend of 10.0 cents per Ordinary Share payable on
17 March 2017 to registered shareholders at 10 March 2017. The total dividend payable will be $112 million. Imputation
credits will be attached and supplementary dividends paid to non-resident shareholders. The dividend has not been
recognised in the December 2016 interim financial statements.
*The difference between distributions recognised and paid relates to supplementary dividends.
Page 1
Air New Zealand Limited
NZX Preliminary Interim Report

PRELIMINARY HALF YEAR REPORT ANNOUNCEMENT
AIR NEW ZEALAND LIMITED
Half Year Ended 31 December 2016 (referred to in this report as the "current half year")
(g) Details of entities over which control has been gained or lost during the period
Date of voluntary
de-registration
C.I. Air Services Limited*23-Nov-16
The London Shoppe Limited*23-Nov-16
*The companies were non-trading entities.
(h) Details of associates and joint ventures:
Parts (i) to (iii)
Name
$NZ'm$NZ'm
Associate
Virgin Australia Holdings Limited*0%25.9%-
15
Christchurch Engine Centre (CEC)**49%49%
10 10
Joint Venture
Pacific Leisure Group Limited***0%50%- -
ANZGT Field Services LLC51%51%- -
11Ants Analytics Group Limited50%50%- -
** The CEC is operated in partnership with Pratt and Whitney.
*** The Group disposed of its 50% interest in Pacific Leisure Group Limited on 22 January 2016.
3.1 Basis of preparation
3.2 Accounting policies
Refer to Note 1 of the Interim Financial Statements.
3.3 Changes in accounting policies
3.4 Audit Review Report
A copy of the review report is attached at the back of the Interim Financial Statements.
3.5 Additional information
Not applicable.
This half year report was approved by the Board of Directors on 23 February 2017.
Tony Carter
Chairman
* The Group ceased equity accounting the investment in Virgin Australia on 30 March 2016 as it no longer had the
ability to exercise significant influence. The investment was fully disposed by 11 October 2016.
There have not been any accounting policy changes during the period.
This report has been compiled in accordance with New Zealand Generally Accepted Accounting Practice ("NZ GAAP").
NZ GAAP consists of New Zealand equivalents to International Financial Reporting Standards ("NZ IFRS") and other
applicable financial reporting standards as appropriate to profit-oriented entities.
Contributions to Net
Profit
Previous
Corresponding
Half Year
Contributions to Net
Profit
Current Half Year
% Held
Previous
Corresponding
Half Year
% Held
Current Half Year
Entities over which control has been lost
Entity Name
Page 2
Air New Zealand Limited
NZX Preliminary Interim Report

Air New Zealand Limited
ARBN 000 312 685
31 December 2016
Half year information given to the ASX under listing rule 4.2A.3
Appendix 4D
1
2Results for announcement to the market:
Current
Half Year
Up/(Down)
Previous
Corresponding Half
Year
$NZ'm%$NZ'm
2.1Revenue from ordinary activities (includes finance income)2,609 (4.3)%2,725
2.2Profit from ordinary activities after taxation256 (24.3)%338
2.3Net profit attributable to members256 (24.3)%338
2.4 - 2.5
2.6
3Net tangible assets per security:
Current
Half Year
Previous
Corresponding Half
Year
Ordinary Shares169175
4Entities over which control has been gained or lost during the period:
Date of voluntary
de-registration
C.I. Air Services Limited*23-Nov-16
The London Shoppe Limited*23-Nov-16
*The companies were non-trading entities.
5Dividends:
$NZ'm*NZ cents per share
Distributions recognised
Final dividend for 2016 financial year on Ordinary Shares11210.0
Special dividend for 2016 financial year on Ordinary Shares28125.0
Distributions paid
Final dividend for 2016 financial year on Ordinary Shares11810.0
Special dividend for 2016 financial year on Ordinary Shares29425.0
6Dividend or distribution reinvestment plans in operation:
This report is for the half year ending 31 December 2016 and should be read in conjunction with the most recent
annual financial report. Comparatives are in respect of the half year ending 31 December 2015.
Details for the interim dividend for 2017 and the final and special dividend for 2016 are provided in section 2.4 - 2.5 above.
A final dividend in respect of the 2016 financial year of 10.0 cents per Ordinary Share, and a special dividend of 25.0 cents per
Ordinary Share was paid on 19 September 2016. Imputation credits were attached and supplementary dividends paid to
non-resident shareholders.
Dividends:
Additional explanation of above information:
On 22 February 2017, the Board of Directors declared an interim dividend of 10.0 cents per Ordinary Share payable on
17 March 2017 to registered shareholders at 10 March 2017. The total dividend payable will be $112 million. Imputation credits
will be attached and supplementary dividends paid to non-resident shareholders. The dividend has not been recognised in the
December 2016 interim financial statements.
Not required.
The dividend reinvestment plan is currently suspended.
(NZ Cents Per Share)
Entities over which control has been lost
Entity Name
*The difference between distributions recognised and paid relates to supplementary dividends.
Page 1
Air New Zealand Limited
ASX Preliminary Half Year Report

Air New Zealand Limited
ARBN 000 312 685
31 December 2016
Half year information given to the ASX under listing rule 4.2A.3
Appendix 4D
7Details of associates and joint ventures:
Name of entity$NZ'm$NZ'm
Associate
Virgin Australia Holdings Limited*0%25.9%- 15
Christchurch Engine Centre (CEC)**49%49%10 10
Joint Venture
Pacific Leisure Group Limited***0%50%- -
ANZGT Field Services LLC51%51%- -
11Ants Analytics Group Limited50%50%- -
** The CEC is operated in partnership with Pratt and Whitney.
*** The Group disposed of its 50% interest in Pacific Leisure Group Limited on 22 January 2016.
8Accounting Standards:
9This report is based on accounts which have been subject to audit review.
A copy of the review report is attached at the back of the Interim Financial Statements.
Directors' Declaration
By resolution of the board, the directors declare that:
-
-
Dated 23 February 2017
Tony Carter
Chairman
This report has been compiled in accordance with New Zealand Generally Accepted Accounting Practice ("NZ GAAP").
NZ GAAP consists of New Zealand equivalents to International Financial Reporting Standards ("NZ IFRS") and other
applicable financial reporting standards as appropriate to profit-oriented entities.
the interim financial statements together with the notes to the interim financial statements give a true and fair view of the
financial position and performance of Air New Zealand Limited and its subsidiaries as at 31 December 2016, as represented by
the results of their operations and their cash flows for the six months ended on that date.
Contributions to Net
Profit
Previous
Corresponding Half
Year
In the directors' opinion, at the date of this declaration there are reasonable grounds to believe that Air New Zealand Limited will be able
to pay its debts as and when they become due and payable.
% Held
Previous
Corresponding
Half Year
Contributions to Net
Profit
Current Half Year
* The Group ceased equity accounting the investment in Virgin Australia on 30 March 2016 as it no longer had the ability to
exercise significant influence. The investment was fully disposed by 11 October 2016.
the interim financial statements together with the notes to the interim financial statements comply with New Zealand generally
accepted accounting practice; and
% Held
Current
Half Year
Page 2
Air New Zealand Limited
ASX Preliminary Half Year Report

Air New Zealand Limited
ARBN 000 312 685
31 December 2016
Half year information given to the ASX under listing rule 4.2A.3
Directors' Report made in accordance with a resolution of the directors
Review of operations and results:
Refer to media release attached.
Directors' details:
The following directors held office during the six months to 31 December 2016 and are directors at the date of this report.
NameDate of Initial Appointment
Tony CarterChairman (Non Executive, Independent)1 December 2010
Jan DawsonDeputy Chairman (Non Executive, Independent)1 April 2011
Paul Bingham(Non Executive, Independent)1 July 2008
Rob Jager(Non Executive, Independent)1 April 2013
Linda Jenkinson(Non Executive, Independent)1 June 2014
Jonathan Mason(Non Executive, Independent)1 March 2014
Dame Therese Walsh(Non-Executive, Independent)1 May 2016
Jan Dawson
Jonathan Mason
Dated 23 February 2017
Tony Carter
Chairman
At the Annual Meeting held on 30 September 2016 the following directors retired by rotation in accordance with the Company's
Constitution and were re-elected to the Board:
At the Annual Meeting on 30 September 2016, a resolution was passed to elect Dame Therese Walsh as an independent director.
Page 1
Air New Zealand Limited
ASX Preliminary Half Year Report

APPENDIX 7 – NZSX Listing Rules
Number of pages including this one
(Please provide any other relevant
NZSX Listing Rule 7.12.2. For rights, NZSX Listing Rules 7.10.9 and 7.10.10.details on additional pages)
For change to allotment, NZSX Listing Rule 7.12.1, a separate advice is required.
Full name
of Issuer
Name of officer authorised to
Authority for event,
make this notice
e.g. Directors' resolution
Contact phone
Contact fax
numbernumber
Date
Nature of event
BonusIf ticked,
Rights Issue
Tick as appropriate
Issue
state whether
:Taxable
/ Non TaxableConversionInterestRenouncable
Rights IssueCapitalCal
lDividend
If ticked, stateFull
non-renouncable
chang
e
X
whether:
Interi
m
X
YearSpecialDRP Applies
EXISTING securities affected by this
If more than one security is affected by the event, use a separate form.
Description of theISI
N
class of securities
If unknown, contact NZX
Details of securities issued pursuant to this eventIf more than one class of security is to be issued, use a separate form for each class.
Description of theISI
N
class of securities
If unknown, contact NZX
Number of Securities toMinimum
Ratio, e.g
be issued following eventEntitlemen
t
1 for 2 for
Conversion, Maturity, Call
Treatment of Fractions
Payable or Exercise Date
Tick i
f
provide an
pari passu
ORexplanation
Strike price per security for any issue in lieu or date
of the
Strike Price available.
ranking
Monies Associated with Event
Dividend payable, Call payable, Exercise price, Conversion price, Redemption price, Application money.
Source of
Amount per securityPayment
(does not include any excluded income)
Excluded income per security
(only applicable to listed PIEs)
SupplementaryAmount per security
Currencydividen
din dollars and cents
details
-
NZSX Listing Rule 7.12.7
Total monies
TaxationAmount per Security in Dollars and cents to six decimal places
In the case of a taxable bonusResident
Imputation Credits
issue state strike priceWithholding Ta
x(Give details)
Foreign
FDP Credits
Withholding Ta
x(Give details)
Timing
(Refer Appendix 8 in the NZSX Listing Rules)
Record Date 5pm
Application Date
For calculation of entitlements -Also, Call Payable, Dividend /
Interest Payable, Exercise Date,
Conversion Date.
Notice Date
Allotment Date
Entitlement letters, call notices,For the issue of new securities.
conversion notices mailedMust be within 5 business days
of application closing date.
OFFICE USE ONLY
Ex Date:
Commence Quoting Rights:
Security Code:
Cease Quoting Rights 5pm:
Commence Quoting New Securities:Security Code:
Cease Quoting Old Security 5pm:
10 March 201717 March 2017
N/AN/A
N/A$0.006944$0.038889
$
NZ Dollars$0.017647
$112.3 million
Date Payable
17 March 2017
Enter N/A if not
applicable
NZAIRE0001S2
In dollars and cents
$0.100
64 21 046 846964 9 336 266722022017
Ordinary Shares
EMAIL: announce@nzx.com
Notice of event affecting securities
1
Air New Zealand Limited
Karen ClaytonDirectors' Resolution

---

Notification of dividend / distribution
Notification of dividend / distribution
1 / 4
Announcement Summary
Entity name
AIR NEW ZEALAND LIMITED
Security on which the Distribution will be paid
AIZ - ORDINARY FULLY PAID
Announcement Type
New announcement
Date of this announcement
Thursday February 23, 2017
Distribution Amount
NZD 0.11764706
Ex Date
Thursday March 9, 2017
Record Date
Friday March 10, 2017
Payment Date
Friday March 17, 2017
Refer to below for full details of the announcement
Announcement Details
Part 1 - Entity and announcement details
1.1 Name of +Entity
AIR NEW ZEALAND LIMITED
1.2 Registered Number Type
ABN
Registration Number
70000312685
1.3 ASX issuer code
AIZ
1.4 The announcement is
New announcement
1.5 Date of this announcement
Thursday February 23, 2017
1.6 ASX +Security Code
AIZ
Notification of dividend / distribution

Notification of dividend / distribution
Notification of dividend / distribution
2 / 4
ASX +Security Description
ORDINARY FULLY PAID
Part 2A - All dividends/distributions basic details
2A.1 Type of dividend/distribution
Ordinary
2A.2 The Dividend/distribution:
relates to a period of six months
2A.3 The dividend/distribution relates to the financial reporting or payment period ending
ended/ending (date)
Saturday December 31, 2016
2A.4 +Record Date
Friday March 10, 2017
2A.5 Ex Date
Thursday March 9, 2017
2A.6 Payment Date
Friday March 17, 2017
2A.7 Are any of the below approvals required for the dividend/distribution before business day 0
of the timetable?
Security holder approval
Court approval
Lodgement of court order with +ASIC
ACCC approval
FIRB approval
Another approval/condition external to the entity required before business day 0 of the
timetable for the dividend/distribution.
No
2A.8 Currency in which the dividend/distribution is made ("primary currency")
NZD - New Zealand Dollar
2A.9 Total dividend/distribution payment amount
per +security (in primary currency) for all
dividends/distributions notified in this form
NZD 0.11764706
2A.9a AUD equivalent to total
dividend/distribution amount per +security
2A.9b If AUD equivalent not known, date for
information to be released
Friday March 10, 2017
Estimated or Actual?
Estimated

Notification of dividend / distribution
Notification of dividend / distribution
3 / 4
2A.10 Does the entity have arrangements
relating to the currency in which the
dividend/distribution is paid to securityholders
that it wishes to disclose to the market?
No
2A.11 Does the entity have a securities plan for
dividends/distributions on this +security?
We do not have a securities plan for
dividends/distributions on this security
2A.12 Does the +entity have tax component
information apart from franking?
No
2A.13 Withholding tax rate applicable to the dividend/distribution
15.000000
Part 3A - Ordinary dividend/distribution
3A.1 Is the ordinary dividend/distribution
estimated at this time?
No
3A.1a Ordinary dividend/distribution estimated
amount per +security
NZD
3A.1b Ordinary Dividend/distribution amount per
security
NZD 0.10000000
3A.2 Is the ordinary dividend/distribution
franked?
No
3A.3 Percentage of ordinary
dividend/distribution that is franked
0.0000 %
3A.4 Ordinary dividend/distribution franked
amount per +security
NZD 0.00000000
3A.5 Percentage amount of dividend which is
unfranked
100.0000 %
3A.6 Ordinary dividend/distribution unfranked
amount per +security excluding conduit foreign
income amount
NZD 0.10000000
Part 3F - NZD declared dividends/distributions - supplementary dividend/distribution
3F.1 Is a supplementary dividend/distribution payable?
Yes
3F.2 Is the supplementary dividend/distribution
estimated at this time?
No

Notification of dividend / distribution
Notification of dividend / distribution
4 / 4
3F.2b Supplementary dividend/distribution amount per +security
NZD 0.01764706
3F.3 Is the Supplementary dividend/distribution
franked?
No
3F.4 Percentage of Supplementary
dividend/distribution that is franked
0.0000 %
3F.4a Applicable corporate tax rate for franking
credit (%)
%
3F.5 Supplementary dividend/distribution
franked amount per +security
NZD 0.00000000
3F.6 Percentage of Supplementary
dividend/distribution that is unfranked
100.0000 %
3F.7 Supplementary dividend/distribution unfranked amount per security
NZD 0.01764706
Part 5 - Further information
5.1 Please provide any further information applicable to this dividend/distribution
5.2 Additional information for inclusion in the Announcement Summary

---

Air New Zealand Limited
Preliminary Half Year Results
23 February 2017
CONTENTS
ASX Half Year Results - Results for announcement to the market (Appendix 4D), pursuant to ASX Listing Rule 4.2A.3
Directors' Declaration (ASX)
Directors' Report (ASX)
NZX Appendix 1, pursuant to NZX Listing Rule 10.3.1
NZX Appendix 7
Air New Zealand Limited
ASX Preliminary Half Year Report

---

INTERIM RESULTS 2017

INTERIM RESULTS 2017
Forward looking statements
2
This presentation contains forward-looking statements. Forward-looking statements often include words
such as “anticipate", "expect", "intend", "plan", "believe“ , “continue” or similar words in connection with
discussions of future operating or financial performance.
The forward-looking statements are based on management's and directors’ current expectations and
assumptions regarding Air New Zealand’s businesses and performance, the economy and other future
conditions, circumstances and results. As with any projection or forecast, forward-looking statements are
inherently susceptible to uncertainty and changes in circumstances. Air New Zealand’s actual results may
vary materially from those expressed or implied in its forward-looking statements.
The Company, its directors, employees and/or shareholders shall have no liability whatsoever to any person
for any loss arising from this presentation or any information supplied in connection with it. The Company is
under no obligation to update this presentation or the information contained in it after it has been released.
Nothing in this presentation constitutes financial, legal, tax or other advice.

INTERIM RESULTS 2017
Christopher Luxon
Chief Executive Officer

INTERIM RESULTS 2017
•Operating revenue $2.6 billion
•Earnings before taxation $349 million*
•Net profit after taxation $256 million
•Operating cash flow $376 million
4
Taxation
($93m)
Net profit
after
taxation
$256m
Earnings
before
taxation
$663m
Earnings
before
taxation
$349m*
The second best interim result in our history
during a period of intense competition
* Includes other significant items related to a gain of $22 million from the divestment of the remaining interest in Virgin Australia.

INTERIM RESULTS 2017
5
Revenue
•Passenger revenue excludingFX down 3.1%; reported down 4.0%
–Demand slightly lagging capacity growth – RPKs and ASKs up 5.5% and
7.1%, respectively
–RASK excluding FX down 9.3%; reported down 10.4%
•Cargo revenue excluding FX down4.3%; reported down 8.6%
Cost
•CASK excludingFX improved 8.5%, reported improved 6.7%
–CASK (excludingfuel price and FX) improved 3.6%
Efficiencies contributed$113 millionto profitability
–Cost of fueldeclined 18%
Fuel declineincludes the benefit of hedging gains over the prior
period and a 5% decrease in average MOPS price (from US$60/bbl
to US$57/bbl)
Lower fuel cost more than offset increased consumption
Note: Passenger revenue per available seat kilometre (RASK) assesses passenger unit revenue. Refer to supplementary slides for definition.
Key drivers of the result

INTERIM RESULTS 2017
6
Sector
Ye a r-on-y e a r ( Yo Y )
2H 2017 RASK outlook
Commentary
Domestic
Better than YoY 1H RASK
•Fluctuations month to month based upon timing of
events (Chinese New Year and Easter)
•Forward bookings reflect increased year on year
demand for events including concerts, Masters
Games and Lions Rugby Tour
Tasman & Pacific Islands
Similar level to YoY 1H RASK
•Fifth freedom and other carrier growth resulting in
excess capacity
•Partially offset by strong initial response to “Better
Way to Fly” campaign focused on Australasia to
North and South America via Auckland
International Long-Haul
Better than YoY 1H RASK
•Downward capacity adjustments by United Airlines
and two Chinese carriers as traditional low season
commences
•Stabilisation of North American pricing expected,
supported by robust demand
Revenue challenged by industry capacity, but
encouraging signs emerging

INTERIM RESULTS 2017
TailwindsHeadwinds
Revenue
•Continued strong growth in inbound and
outbound tourism
•Low season capacity management from several
international carriers
•Supportive economic conditions in New Zealand
•Domestic events driving additional demand
•First full year of new international
competition in North America and Asia
•Industry capacity growth on the Tasman
•Softer demand from Japan following
Kaikouraearthquake
Cost
•Additional efficiencies from aircraft received in
first half of the year
•Retirement of last two B767 in March
•Continuation of productivity gains
•Fuel price
Negative RASK (but improving) and fuel headwind drive 2H performance
7
Tailwinds and headwinds looking to the
second half of 2017

INTERIM RESULTS 2017
Rob McDonald
Chief Financial Officer

INTERIM RESULTS 2017
Changes in profitability
9

INTERIM RESULTS 2017
10
•CASK excluding FX improved 8.5%; reported improved 6.7%
•$113 million of efficiencies from growth, fleet simplification, productivity and other cost saving initiatives
more than offset inflation
•Fuel cost decreased 18%
–Includes the benefit of hedging gains over prior period and a 5% decrease in average MOPS price
(from US$60/bblto US$57/bbl)
* Operating expenditure per ASK.
CASK* improvement
CASK (ex fuel price & FX)
improved 3.6%

INTERIM RESULTS 2017
11
•Completed roll-out of re-designed network schedule, resulting in:
–Less complexity
–Greater choice for business travel
–Improved intra-regional and regional New Zealand-to-international connections
* Calculation based on numbers before rounding and excluding the impact of foreign exchange.
** Reported Domestic RASK decreased by 5.7% and yield decreased by 5.9%, inclusive of foreign exchange impact.
Dec 2016Dec 2015Movement*
Passengers carried (‘000s)5,2074,9325.6%
Available seat kilometres (ASKs, millions)3,3193,0937.3%
Revenue passenger kilometres (RPKs, millions)2,6492,4657.5%
Load factor79.8%79.7%0.1 pt
Passengerrevenue per ASKs (RASK, cents)20.721.9(5.3%)**
Yield (cents per RPK)25.927.5(5.5%)**
Domestic

INTERIM RESULTS 2017
12
•Sector impacted from industry capacity growth directly on the Tasman as well as increase in direct services to New
Zealand from Chinese and Gulf carriers
•Strong demand for Pacific Island routes from New Zealand outbound travellers
•Launch of Australian brand campaign, “Better Way to Fly”
* Calculation based on numbers before rounding and excluding the impact of foreign exchange.
** Reported Tasman & Pacific Islands RASK decreased by 8.6% and yield decreased by 6.0%, inclusive of foreign exchange impact.
Dec 2016Dec 2015Movement*
Passengers carried (‘000s)1,8531,859(0.3%)
Available seat kilometres (ASKs, millions)6,2656,0244.0%
Revenue passenger kilometres (RPKs, millions)5,1045,0461.2%
Load factor81.5%83.8%(2.3 pts)
Passengerrevenue per ASKs (RASK, cents)9.410.3(7.7%)**
Yield (cents per RPK)11.512.2(5.2%)**
Tasman & Pacific Islands

INTERIM RESULTS 2017
13
•Anniversary ofHouston and Buenos Aires; strong performance for both routes
•Seasonal routes of HoChi Minh City (June – October) and Osaka (November – April)
•Announced commencement into Hanedaairport in Tokyo beginning in July 2017
* Calculation based on numbers before rounding and excluding the impact of foreign exchange.
** Reported International RASK decreased by 14.3% and yield decreased by 13.3%, inclusive of foreign exchange impact.
Dec 2016Dec 2015Movement*
Passengers carried (‘000s)1,0269666.1%
Available seat kilometres (ASKs, millions)11,82510,8688.8%
Revenue passenger kilometres (RPKs, millions)10,0379,3537.3%
Load factor84.9%86.1%(1.2 pts)
Passengerrevenue per ASKs (RASK, cents)8.09.3(13.2%)**
Yield (cents per RPK)9.410.8(12.0%)**
International

INTERIM RESULTS 2017
14
•Revenue decline driven by
–Competition from new carriers in U.S. and
Asia
–Los Angeles International airport runway
issues
•Partially offset by strong volume growth related
to new Houston and Buenos Aires routes and
larger aircraft on the Tasman
Cargo
Volume
up 8.5%
Yield
down
12.8%
Revenue
down
4.3%*
* Reported cargo revenue decreased 8.6%, inclusive of foreign exchange impact.

INTERIM RESULTS 2017
15
• Expected investment of ~$1.6 billion in aircraft
and associated assets over the next 4.5 years
• Assumes NZD/USD = 0.725
• Includes progress payments on aircraft
• Entered into operating lease agreement with Air
Lease Corporation for one Boeing 787-9 aircraft
* Excludes orders of up to five A320/A321 NEOs with purchase substitution rights.
Aircraftdelivery schedule (as at 31 December 2016)
Number in
existing fleet
Number on
order
DeliveryDates (financial year)
2H 20172018201920202021
Owned fleet on order
Boeing 787-9
93-21--
Airbus A320/A321 NEOs*
-8-35--
ATR72-500/600
2614-455-
Operating leased aircraft
Boeing 787-9
-1--1--
Airbus A320/A321 NEOs
-5-32--
Aircraft update

INTERIM RESULTS 2017
16
•Operating cash flow $376 million
–One-time outflow of $58 million related to a
restructured engine maintenance agreement
•Net cash on hand of $1.3 billionincludes:
–$182 million inflow from the sale of remaining
investment in Virgin Australia and repayment of
shareholder loan
–$412 million outflow from final and special
dividends
Operating cash flow and liquidity remain robust

INTERIM RESULTS 2017
17
•Gearing was 55.9%,increasing 7.3 percentage points from
June 2016
–Near-term gearing expected to remain around the high
end of target range (45% to 55%) as the fleet programme
nears completion
•Stable outlook Baa2rating from Moody’s
•New $50 million retail bond, maturing October 2022
–$150 million retail bond matured in November 2016
•Fully imputed interim dividend of 10.0 cents per share
Continued capital discipline underpinning
balance sheet strength

INTERIM RESULTS 2017
18
1
Assumes average jet fuel price of US$65 per barrel for the second half of the 2017 financial year and a NZD/USD rate of 0.72.
Fuel cost outlook and sensitivities
484
362
846
390
~430
1
~820
1
0
200
400
600
800
1,000
1H2HFY
NZD millions
2017 Fuel cost outlook
20162017
400
410
420
430
440
$60.0$62.5$65.0$67.5$70.0
NZD
Fuel cost
(m)
Singapore jet fuel (US$ per barrel)
2017E
2H 2017 Fuel cost sensitivity (inclusive of hedging)

INTERIM RESULTS 2017
Christopher Luxon
Chief Executive Officer

INTERIM RESULTS 2017
20
Sector2H 2017 capacityFull year capacity
Domestic~+11%~+9%
Tasman & Pacific Islands~+6%~+5%
International Long-haul~+3%~+6%
Group~+5%~+6%
Full year capacity growth

INTERIM RESULTS 2017
21
2017 outlook
Based on the current market environment and expectations
for the average jet fuel price in the second half of the year of
US$ 65/bbl
1
, we are targeting 2017 earnings before taxation
to be in the range of $475 to $525 million
2
1
Refers to Singapore jet fuel.
2
Outlook for earnings before taxation includes the $22 million gain related to the divestment of the remaining interest in Virgin Australia
and Air New Zealand’s share of earnings in associates.

INTERIM RESULTS 2017

INTERIM RESULTS 2017
Supplementary
slides

INTERIM RESULTS 2017
24
Hedging
* Fuel hedging as at 14 February 2017.
Fuel hedging*
2H 2017
(Jan – Jun 2017)
1H 2018
(Jul – Dec 2017)
Brent collars
Volume3,415,0002,157,500
Ceiling Price (USD)52.5056.54
Floor price (USD)36.6243.05
Estimated fuel consumption4,203,4984,500,000
Hedged volume as a
percentage of total
81%48%
U.S. dollarhedging
2H 2017
(Jan – Jun 2017)
2018
Hedged value
US$367 millionUS$360 million
Hedged rate
(NZD/USD)
0.700.72

INTERIM RESULTS 2017
25
* Comparative is for 30 June 2016.
** Dividends are fully imputed.
Dec 2016
$M
Dec 2015
$M
Movement
$M
Movement
%
Operating revenue 2,5842,698(114)(4.2%)
Earnings before taxation349457(108)(24%)
Net profit after taxation 256338(82)(24%)
Operating cash flow 376541(165)(30%)
Net cash position* 1,2881,594(306)(19%)
Gearing* 55.9%48.6%n/a(7.3 pts)
Ordinary dividends declared** 10.010.0--
Financial overview

INTERIM RESULTS 2017
26
* Calculation based on numbers before rounding and excluding the impact of foreign exchange.
** Reported Group RASK decreased by 10.4% and yield decreased by 9.0%, inclusive of foreign exchange impact.
Dec 2016Dec 2015Movement*
Passengers carried (‘000s)
8,0867,7574.2%
Available seat kilometres (ASKs, millions)
21,40919,9857.1%
Revenue passenger kilometres (RPKs, millions)
17,79016,8645.5%
Load factor
83.1%84.4%(1.3 pts)
Passengerrevenue per ASKs (RASK, cents)
10.311.5(9.3%)**
Yield (cents per RPK)
12.513.7(8.1%)**
Group performance metrics

INTERIM RESULTS 2017
27
•Boeing 767-300ERs exiting by March 2017
•Beech 1900Ds exited service in August 2016
Projected aircraft in service
7.0
6.6
6.2
7.0
8.0
20172018201920202021
Financial year
Aircraftfleet age in years
(seat weighted)
20172018201920202021
Boeing 777-300ER
77777
Boeing 777-200ER
88888
Boeing 787-9
911131313
Airbus A320
3025181717
Airbus A320/A321 NEO
-6131313
ATR72-600
1519242929
ATR72-500
1174--
Bombardier Q300
2323232323
Total Fleet103106110110110

INTERIM RESULTS 2017
Glossary of terms
28
Available Seat Kilometres (ASKs)
Number of seats operated multiplied by the distance flown (capacity)
Cost/ASK (CASK)
Operatingexpens es divided by the total ASK for the period
Gearing
Net Debt / (NetDebt + Equity); Net Debt includes capitalised operating leases
Net Debt
Interest-bearing liabilities and bank overdrafts, less bank and short-term deposits, net open derivatives held in relation to
interest-bearing liabilities, interest-bearing deposits and non-interest bearing deposits, plus net aircraft operating lease
commitments for the next twelve months multiplied by a factor of seven
Passenger Load Factor
RPKs as a percentage of ASKs
PassengerRevenue/ASK (RASK)
Passenger revenuefor the period divided by the total ASK for the period
Revenue Passenger Kilometres
(RPKs)
Number of revenue passengers carried multiplied by the distance flown (demand)
Yield
Passengerrevenue for the period divided by revenue passenger kilometres
The following non-GAAP measures are not audited: CASK, Gearing, Net Debt, RASK, and Yield.Amounts used within the calculationsare derived from
the condensed Group interim financial statements where possible. The interim financial statements are subject to review by the Group’s external
auditors. The non-GAAP measures are used by management and the Board of Directors to assess the underlying financial performanceof the Group in
order to make decisions around the allocation of resources.

=== IR PAGE TRANSCRIPT: 2017 Interim results Analyst Call Transcript ===

THOMSON REUTERS STREETEVENTS
EDITED TRANSCRIPT
AIR.NZ - Interim 2017 Air New Zealand Ltd Earnings Call
EVENT DATE/TIME: FEBRUARY 22, 2017 / 10:00PM GMT
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the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated
companies.

CORPORATE PARTICIPANTS
Leila Peters Air New Zealand - Head of IR
Christopher Luxon Air New Zealand - CEO
Rob McDonald Air New Zealand Limited - CFO
CONFERENCE CALL PARTICIPANTS
Nick Mar Macquarie - Analyst
Andy Bowley Forsyth Barr - Analyst
Owen Birrell Goldman Sachs - Analyst
Matt Peek Craigs Investment Partners - Analyst
Andrew Steele FNZC - Analyst
Marcus Curley UBS - Analyst
PRESENTATION
Leila Peters - Air New Zealand - Head of IR
Thank you and good morning everyone. Today's call is being recorded and will be accessible for future playback on our investor centre website,
which you can find at www.airnewzealand.co.nz/investor. Also on the website you can find our interim results presentation, shareholder review,
media release and relevant stock exchange disclosures. Speaking on the call today will be Chief Executive officer Christopher Luxon and Chief
Financial Officer Rob McDonald.
I would like to remind you that our comments today will include certain forward looking statements regarding our future expectations which may
differ from actual results. We ask that you read through the forward looking cautionary statement provided on slide 2 of the presentation. With
that I will turn the call over to Christopher.
Christopher Luxon - Air New Zealand - CEO
Well thanks Leila and Kia Ora and good morning everyone and also thanks for joining us on this call. A very strong performance I think for the first
six months of 2017 in a period that we knew would be challenging as we face an unprecedented new amount of new international competition
in the New Zealand market. Before I start I'd like to personally thank all Air New Zealanders for their continued dedication and hard work. Even
more important is the enthusiasm and the energy that our team demonstrates every day which I think differentiates us in the eyes of our customers.
Culture is strongly linked to performance and our culture has proven itself time and time again to be agile and to be effective in making our airline
as competitive as possible. This time it's no different and I do want to acknowledge our people for their contribution to this great performance.
I'm going to talk a little bit about the environment this morning, about what we saw in our market since we reported in August and how that has
tracked against our expectations. Our teams have made great strides to increase productivity in response to the more challenging environment
and that is clear when you look at our cost improvement for the period. I'll also give some insight into what we're seeing as we focus on the rest
of this year. I'll then turn it over to Rob who will provide more details on the financial results and how we are tracking with regard to our capital
program, our key financial metrics and hedging. Finally, I'll provide some comments on the full year outlook before opening up the call for questions.
Now touching briefly on the financial highlights of the first six months, we recorded our second best interim result in Air New Zealand's history
with earnings before taxation of NZD349 million. This is a great achievement in the face of the strong competition we saw this period and this
result includes a NZD22 million gain related to the divestment of our remaining interest in Virgin Australia. Net profit after taxation was NZD256
2
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companies.
FEBRUARY 22, 2017 / 10:00PM, AIR.NZ - Interim 2017 Air New Zealand Ltd Earnings Call

million. Operating revenue was NZD2.6 billion, a decrease of 3% excluding foreign exchange. And lastly, our operating cashflow generation
continues to be very robust at NZD376 million.
Now turning to slide 5, competitive capacity from new carriers certainly impacted revenue with eight new carriers entering the New Zealand market
resulting in a passenger revenue decline of 3.1% in the period. Demand slightly lagged the capacity growth of 7.1% and market yields declined.
While we saw our RASK excluding foreign exchange decline 9.3%, this growth continues to be positive to our earnings and our entire network
continues to be profitable.
Cargo revenue was impacted by the same competitive dynamics and was down 4.3% excluding foreign exchange. The decline in revenues was
expected and helping to partially offset the impact to our profitability was the quick response by our team. There's been a real focus internally on
managing our costs, specifically making sure we are doing everything we can to leverage efficiencies from our fleet and ramping up our own
productivity.
As Rob will touch on later, our unit costs improved 8.5% with efficiencies driving a significant portion of that improvement. When we exclude the
impact of fuel price and foreign exchange our per unit cost still improved I think an incredibly impressive 3.6%. Air New Zealand has demonstrated
steady unit cost improvement now for several years and I'm incredibly proud of the progress our teams have made on this front, resulting in savings
of NZD113 million in the period. Lastly, fuel was a tailwind with our cost of fuel declining 18%.
Turning to the broader market it is obvious that we have had to adjust to a new revenue department. Compared to the prior period when the
competition was fairly benign in some regions, our year on year RASK decreased. However, these declines occurred at varying levels across our
market and for varying reasons. RASK fell as expected on the domestic network reflecting the annualization impact of Jetstar entering a number
of our regional markets. RASK was also impacted on a number of sectors where we grew capacity at a relatively fast rate as part of our overall
strategy of up gauging to larger aircraft and stimulating demand through lower prices. However, this capacity growth and larger aircraft are also
driving strong improvements in our cost base.
We've also grown faster in markets that are traditionally more leisure based such as Queenstown which is resulting in a mixed impact. Queenstown
is a great example of growing profitably. We increased domestic capacity to this market about 25% but there was really strong inbound tourism
and domestic demand to justify that growth and we filled those additional seats.
The New Zealand market is a key part of our business and it continues to show healthy demand, both from the strength in the domestic economy,
as well as inbound tourism. And looking to the second half of the year we expect an improvement in the year on year RASK decline compared to
the first half. On a month to month basis however there is likely to be fluctuations in the RASK as we finish the year which are related to the timing
of events or holidays.
There are certainly some highly anticipated events planned for the second half which will also bring stronger demand to domestic travel such as
a number of concerts, the World's Masters Games in April and the Lions tour at the end of June and the beginning of July. We expect these events
as well as underlying strong demand to make the domestic market our strongest sector in terms of RASK performance for the second half of the
year.
Now moving to the Tasman and the Pacific Islands where we saw the industry capacity grow about 10%. I'd like to touch briefly on some of the
dynamics in both the Tasman and the Pacific markets which are quite different. Now the Trans-Tasman market is always a competitive sector and
this period we lived in a challenging pricing environment. This was mainly the result of capacity additions and the seat numbers now available in
the point to point market due to direct long haul services from other carriers. Looking to the remainder of the year we expect similar levels of
performance on the Tasman.
I would say however there are pockets of optimism in this sector as we look ahead. For example this period we launched a new brand campaign
in Australia that we call a better way to fly featuring Dave the goose. While still in the early months this has been extremely successful in educating
the Australian market that we don't just fly across the Tasman but we also fly to five different destinations in North and South America. And building
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FEBRUARY 22, 2017 / 10:00PM, AIR.NZ - Interim 2017 Air New Zealand Ltd Earnings Call

this awareness across the ditch has been a critical pillar of our strategy to leverage Australasia flows to the Americas and vice versa. You can expect
continued focus on market development such as this campaign as we go through this year and beyond.
We also continue to be pleased with the performance of our Pacific Island routes which overall are showing strong customer demand due to an
increase in outbound New Zealand travel. In exiting from the 767 aircraft we have up gauged several of these destinations to the 787 Dreamliner
and have received a great customer response as well as strong improvement on the economics of these routes with the new aircraft. As we look
to the second half of this year we expect this market will continue to perform.
Finally, international long haul clearly was the sector most impacted by the influx of new international carriers and to provide some perspective,
overall industry capacity across our entire long haul market increased about 30% in the first half of the year. North American routes initially
experienced the impact of a new competitor and introductory pricing over the low season which then improved as we moved into the peak summer
season. And this region actually performed slightly better than we had expected in the beginning of the year due to strong demand.
Looking ahead we're optimistic about both North and South America. Our Houston route is performing very well and is diversifying our reach into
the United States beyond the traditional West Coast markets and on into the East Coast and Mid-West. And over the peak season we increased
frequency from five times a week to daily and will continue to develop and build that route as part of our North American strategy.
Bueno Aires has also performed ahead of our expectations in its first year and it's seeing strong demand from all three points of sale, across Australia
and New Zealand as well as Argentina. I think these routes are a great example of the benefits of developing a diversified network which has made
our airline much more resilient.
Our alliance partner United Airlines will suspend operations over the low season on the San Francisco route. Air New Zealand therefore will pick
up some of the flying over that period to maintain a daily service and that will result in some capacity coming off that market in our fourth quarter.
Turning to Asia we certainly experienced weaker performance than we had hoped in the period. Overall the new capacity introduced by carriers
in China and Hong Kong was just too much for the market to absorb and we saw this manifest itself in RASK declines in the first half.
Additionally the Kaikoura earthquake which impacted New Zealand in November had a roll in softening demand in the Japanese market. After the
earthquake we experienced some cancellations from Japanese visitors and this weakness continues to persist early in the second half, but we do
see this as a temporary setback only. I can tell you our sales teams in Japan are very focused on stimulating this market and looking beyond 2017
we will be increasing our capacity to Japan and will begin splitting our services between Narita and Haneda airports in July. We currently only fly
to Narita airport and the ability to get a slot at Haneda, which is much closer to Tokyo and offers better domestic connections, is a key part of our
strategy to grow the Japanese market.
So I guess I'd say despite the tough environment currently in Asia there are encouraging signals as we look ahead to the end of the year. Some
Chinese carriers appear to be taking steps to reduce frequency to New Zealand in our low season and this has the potential to help our international
long haul RASK when looking beyond 2017.
So in summary there are some moving parts but we feel better where we stand today looking out than we did six months ago. And that doesn't
mean that our teams get complacent. We still are facing a significant amount of competition and it will still be very challenging but you can expect
that our teams will be very focused on execution regardless of the environment.
Now broadening the scope beyond the revenue environment, if I can briefly touch on the key tailwinds and headwinds facing the business for the
remainder of the year. A number of these will be familiar. Inbound tourism grew 12% for the 2016 calendar year and this positively impacts our
international network and provides a flow-on benefit to our domestic network. Also performing well was outbound tourism of Kiwis traveling
abroad, which grew at almost 9% in 2016 compared to 6% in the prior year. Air New Zealand gets a disproportionate share of the outbound
international traffic and our robust economy suggests we can expect continued strong outbound growth this year as well.
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FEBRUARY 22, 2017 / 10:00PM, AIR.NZ - Interim 2017 Air New Zealand Ltd Earnings Call

I've already touched on the moderated capacity plans we are seeing from other international carriers as well as the New Zealand economy and
upcoming events, so I'll move next to the cost tailwinds that we project for the rest of the year. We will see a positive impact coming from the
additional ATRs we received in the period, and we also received delivery of three additional Dreamliners to our fleet in the first half, bringing the
total to nine.
And with those aircraft, we expect to see a step-up in efficiencies, especially as we exit the remaining two 767 aircraft from our fleet in March. At
that point we will be operating just three different jet aircraft groups across the entire network.
And then you can expect the strong productivity that we demonstrated in the first half to continue into the second half. That will be across the
cost structure as we work hard to drive good economies of scale from our growth as well as effectively manage our fixed costs.
Now, I've already commented at length about all of the points and the revenue headwinds, so I'll move to the cost headwind in the second half,
which is really about fuel price. When we started the year, we based our initial outlook range on $55 jet fuel, and it has clearly tracked higher in
recent months. And while fuel was a tailwind in the first half, it will be a headwind in the second half at the $65 level we are seeing today. And I
know Rob will go into this in greater details shortly and provide some pretty good clarity as to how we see fuel impacting our second half costs.
So to wrap things up, we knew this year would be a really challenging environment, but I'm incredibly pleased with the way we've performed in
the first half. We delivered our second-best interim result by achieving some really strong cost efficiencies and productivity gains, and we are also
working incredibly hard on market development to drive profitable growth. We are fundamentally feeling good about some of the capacity decisions
we have seen from other carriers, especially as we go into our low season, and we have decent foresight into the revenue outlook for the rest of
the year and we expect the year-on-year RASK decline to improve compared to the first half.
Now, those are the short-term initiatives that we implemented in the beginning of the year. Then there are the longer-term strategic initiatives
and investments that we've been working on for the past five years, namely the continued diversification of our network across the Pacific Rim
region, investing where it matters to our customers in areas such as fleet, lounges, airport kiosks, loyalty, digital and so forth.
And finally, all the work we continue to do with our people to keep them engaged, to ensure their wellbeing and to help them develop their careers.
It really is those investments that are now bearing fruit and holding us in tremendous stead as we face this competition.
So now let me hand it over to Rob.
Rob McDonald - Air New Zealand Limited - CFO
Thanks, Christopher. Kia Ora and good morning. I will walk through the key movements which affected our performance during the period. Please
note that these numbers isolate the impact of foreign exchange.
As Christopher discussed earlier, operating revenue was the largest driver of the decline in profitability. Revenue, excluding FX, decreased by NZD81
million. Capacity growth increased passenger revenue by NZD98 million, which was offset by a reduction in RASK of NZD170 million. Cargo and
other revenue contributed a further NZD9 million to the decline.
Labour costs were relatively flat, increasing by just NZD7 million as activity and rate increases were mostly offset by improved productivity and
reduced incentive provisions. Our total labour cost, excluding FX, increased 1.1% on capacity growth of 7.1%, which is a great outcome.
Fuel costs declined NZD62 million. Our average cost of fuel decreased by 18%. This included the benefit of hedging gains in the current year
compared to hedging losses that were realized in the previous period. Fuel price related savings were NZD92 million. These savings were partially
offset by NZD30 million relating to increased fuel consumption.
Maintenance, aircraft operations and passenger service costs were NZD14 million higher. We saw good improvements in maintenance costs across
the fleet, with benefits from the exit of the 767 and the additional new aircraft. Offsetting those improvements were higher passenger services and
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FEBRUARY 22, 2017 / 10:00PM, AIR.NZ - Interim 2017 Air New Zealand Ltd Earnings Call

operating costs from increased flying. Sales and marketing was flat and other expenses increased by NZD7 million, primarily related to a lower gain
on sale from fixed assets as well as an increase in digital expenditure.
Ownership costs were NZD11 million higher due to increased depreciation expense relating to the delivery of new aircraft. We realized a NZD22
million benefit related to the divestment of the remaining interest in Virgin Australia. That benefit was partially offset by the equity earnings which
we recorded last period. The net result was a NZD7 million improvement.
Foreign exchange hedging movements offset the net positive impact of currency movements on the revenue and costs resulting in a NZD57 million
negative impact to profitability. The net result of all these movements is an incremental decrease in earnings before taxation of NZD108 million.
Going a bit deeper into the operations, our unit cost performance improved 8.5%. that was helped by an 18% reduction in our cost of fuel, which
more than offset adverse changes in foreign exchange. What is impressive is our efficiencies were the largest driver of the improvement in unit
cost, driving NZD113 million in savings. Even when offset by the minor increases in pricing, our underlying cost still improved 3.6%.
Christopher touched on this a bit, but I wanted to expand a little on where those savings are coming from. We see them coming from the transition
away from the 767s and our wide-body fleet and replacing those aircraft with larger, more modern and efficient Dreamliners.
We see it in the regional fleet following the exit of the Beech aircraft and investing in the larger ATR turboprop. We also see it coming from good
management of overhead costs. So it is quite simply across the board.
Our domestic network continued to perform well this period. As Christopher mentioned, capacity grew at 7.3% due to increased services on the
Auckland-Queenstown route, as well as the main trunk routes. Transitioning to the larger ATR turboprops in the regional routes also contributed
to the growth. RASK, excluding FX, decreased 5.3% with load factors remaining relatively stable.
We completed the rollout of our new network schedule, which was an effort that had spanned about six months, and involved completely redesigning
the regional and jet schedule. There are many customer and commercial benefits of the new schedule, which is significantly less complex. The
schedule now maximizes capacity and frequency where there is strong demand, therefore driving stronger returns, and it provides better intra-regional
connections within New Zealand as well as better regional to international connections for our customers.
Moving on to the Tasman and Pacific Islands, capacity grew at 4%, reflecting growth on several Pacific Island routes, Perth and the up-gauging to
larger aircraft. RASK, excluding FX, decreased 7.7% due to the pressures from the competitors that Christopher touched on earlier. We are seeing
good demand for our Pacific Island destinations, and on these routes we have been replacing older 767s with Dreamliners and seeing customer
satisfaction increase notably.
Turning to international, capacity grew 8.8% in the period, reflecting annualization of Houston and Buenos Aires routes. Due to the entry of a
number of new international competitors, RASK, excluding FX, decreased 13.2%.
Turning to cargo. While this continues to be a very strong business for us, cargo was clearly impacted by similar competitive trends that we
experienced in passenger revenue. Competition from carriers in North America and Asia drove a yield decline of 12.8%, which was partially offset
by a strong volume growth of 8.5% coming from new routes to the Americas and up-gauging of our flights.
We have developed a new inter-line relationship with United Airlines for cargo, which is providing good connectivity throughout the United States
and on to Europe. We think there is good opportunity to develop these markets further as we look forward.
Issues with the Los Angeles airport taxiways and runways, which are under reconstruction, have had an adverse impact on our ability to drive
additional volume which impacted cargo revenues by approximately 1 percentage point. Lastly, our domestic cargo business performed well,
driven by good yield growth and demand from a strong New Zealand economy.
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FEBRUARY 22, 2017 / 10:00PM, AIR.NZ - Interim 2017 Air New Zealand Ltd Earnings Call

Moving on to our fleet update, in the first half of this year we received delivery of three Dreamliners, one Airbus A320 and two ATR turboprops. We
also acquired two Airbus A320 Tasman aircraft that were previously on operating lease.
The CapEx for this year is substantially complete and as you can see from the chart on this slide, we only have two more years of the current fleet
replacement to go, after which the level of spend is expected to decline significantly. Based on our current forecasts, we expect CapEx related to
aircraft and associated assets over the next 4.5 years to be approximately NZD1.6 billion.
Just touching briefly on operating leases, we recently entered into an agreement with Air Lease Corporation to take one additional 787 aircraft on
operating lease, with the delivery in the 2019 financial year. This is reflected in the table at the bottom of the slide and will bring the total 787 to
13.
We generated a solid cash flow of NZD376 million and we ended the period with net cash on hand of NZD1.3 billion compared to the balance of
NZD1.6 billion at the end of June. There were some key movements to highlight from a cash perspective.
Firstly, there was an outflow of NZD58 million relating to a onetime restructuring of an engine maintenance agreement. This decision has a short-term
impact on the operating cash flow but will yield cost reductions over the next three years.
Then we had a NZD182 million net inflow resulting from the repayment of the shareholder loan we made to Virgin Australia as well as the net
proceeds from the sale of our remaining interest. Lastly, there was a NZD412 million outflow from the payment of the 2016 final and special
dividends.
Our gearing was 55.9% at the end of the period, increasing 7.3 percentage points from the end of June. The level of CapEx in the period primarily
drove the increase as well as the payment of the 2016 special dividend.
While our target gearing is 45% to 55% as we near the completion of our fleet program in 2018 and 2019, it is expected it will sit around the upper
end of this range. We are comfortable with that level given our consistent focus on financial discipline and management of the balance sheet, as
well as the drop-off in CapEx that is forecasted after 2019. We continue to maintain a credit rating Baa2 from Moody's with a stable outlook.
In October, we issued a new NZD50 million unsecured, unsubordinated fixed-rate bond which matures in 2022 and partially replaced the NZD150
million bond that matured in November. As a result of an operating performance that ranks as our second-best in history, the airline's financial
strength and capital commitments over the next few years as well as the trading environment, the Board was pleased to announced a fully-imputed
interim dividend of NZD0.10 per share which is consistent with the prior year.
Turning finally to fuel and our outlook for the remainder of the year, given the hedging profile. To be helpful, we've provided an outlook of estimated
fuel costs for the second half of the year based upon an assumption of jet fuel at $65 a barrel. Based on the makeup of our collars, we have also
provided an approximation of how moves up or down of fuel price would impact our fuel cost for the second half of the year.
At $65 for jet fuel per barrel, our fuel costs in the second half would be approximately NZD430 million, which would bring our full year fuel costs
to about NZD820 million. As you can see from the first half and the second half breakdown in the chart on the left hand side of slide 18, while fuel
was a tailwind in the earnings in the first half, it will reverse into a headwind for the second half.
Now let me turn back to Christopher to discuss the outlook for the rest of the year.
Christopher Luxon - Air New Zealand - CEO
Well thanks Rob and turning to slide 20, we have provided a breakdown of our capacity forecast for the second half and the full year. I think it's
fairly self-explanatory but what you'll notice is a large decline on the international long haul capacity growth in the second half as the annualisation
from Houston and Buenos Aires laps itself. Our domestic capacity plans for the rest of the year include growth to capture the demand strength
we're seeing and includes more frequency in the jet market, specifically Queenstown but also in Christchurch, Dunedin and Wellington. Also
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FEBRUARY 22, 2017 / 10:00PM, AIR.NZ - Interim 2017 Air New Zealand Ltd Earnings Call

reflected in the domestic growth is the continued impact of our up-gauging to larger aircraft across our regional network and total capacity growth
planned for the Group will be about 5% in the second half of the year, bringing our full year capacity growth to about 6%.
Turning now to the outlook for the year. As we look to the end of the financial year, we expect the revenue environment will improve from the first
half of the year. However higher fuel prices will be a headwind in the second half. So based on the current market environment and our expectations
for the average jet fuel price in the second half of the year of US$65 per barrel, we are targeting 2017 earnings before taxation to be in the range
of NZD475 million to NZD525 million. This target includes the NZD22 million gain related to the divestment of our remaining interests in Virgin
Australia as well as our share of earnings in associates.
So can I say thank you for listening and now Operator, please open up the line for any questions.
QUESTIONS AND ANSWERS
Operator
Thank you. (Operator Instructions) Your first question comes from Nick Mar of Macquarie. Please go ahead.
Nick Mar - Macquarie - Analyst
Hey guys. Just a couple of quick ones from me. Firstly on the maintenance costs, how much of that decline was related to timing versus the more
efficient fleet?
Rob McDonald - Air New Zealand Limited - CFO
Hi Nick. It's Rob here. It's a bit of both. So there's some timing in that period but also we really are starting to see the benefits of that growing 787
fleet and the departure of the 767 fleet and obviously the last two out next month.
Nick Mar - Macquarie - Analyst
So just kind of on a full year basis, last year was kind of NZD350 million. Where would you see it landing this year?
Rob McDonald - Air New Zealand Limited - CFO
That's very much in the region we expect.
Nick Mar - Macquarie - Analyst
Thank you and just secondly, on the guidance, just to clarify, the guidance provided earlier, the NZD400 million to NZD600 million, was that including
any assumption around that kind of significant item or the gain on the sale of the Virgin stake?
Christopher Luxon - Air New Zealand - CEO
No it wasn't, Nick.
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FEBRUARY 22, 2017 / 10:00PM, AIR.NZ - Interim 2017 Air New Zealand Ltd Earnings Call

Nick Mar - Macquarie - Analyst
Okay, no that's good.
Christopher Luxon - Air New Zealand - CEO
We didn't know at the time to be honest that the investment -- whether we'd be able to sell it and for how much we'd be able to sell it for.
Nick Mar - Macquarie - Analyst
Great, thanks guys.
Christopher Luxon - Air New Zealand - CEO
Thank you.
Operator
Your next question comes from Andy Bowley of Forsyth Barr. Please go ahead.
Andy Bowley - Forsyth Barr - Analyst
Thanks very much and good morning Christopher. First question here around costs. Really impressive cost result here and you mentioned in your
presentation a real focus on cost during the period. I guess in terms of my question here, two subcomponents. To what extent did your cost focus
change during the first half in light of the fact that RASK probably deteriorated more than you would have anticipated six months ago and then
the second component of the question, if we continue to grow capacity which, given the aircraft deliveries over the next few years suggests that
we will, can we continue to keep labour costs similar to current levels, which is what you've done pretty successfully over the last six months?
Christopher Luxon - Air New Zealand - CEO
Yes, hi Andy. Look I mean the cost control was really a good standout here as you know, down 8.5% including fuel but stripping that out, down
3.6%. That is a really impressive result. When I go around and look at every other airline at this part of the cycle, they've all got cost inflation going
on at the unit cost level. So it's a really good outcome.
As to what changed, I mean I've said this to you guys before, but we are trying to run it like a business and we do it quarter by quarter. So we were
at the beginning in August 1, we were seeing revenue pressure as we talked to you about. We said it would be choppy, we said it would be transition,
it would be adjusting supply to demand and equilibrizing that. The business -- we get -- need to make sure we've got the cost tension that's sitting
alongside that revenue tension. So that's all we've done and we got onto that. We could see it coming. We got onto it really early and we executed
it very, very well. I mean it's an outstanding result.
Second question, part of your question mate was around -- just remind me again?
Andy Bowley - Forsyth Barr - Analyst
The labour component of cost which is, you know, a sizeable proportion of the overall. To what extent should we expect that to increase in light
of capacity increases going forward?
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FEBRUARY 22, 2017 / 10:00PM, AIR.NZ - Interim 2017 Air New Zealand Ltd Earnings Call

Rob McDonald - Air New Zealand Limited - CFO
Hi Andy, it's Rob here. Just on the labour cost, there's a couple of aspects to that one. One we do highlight in the report which is that the incentive
payments are obviously lower this year than they were last year, given the level of profitability last year.
So that is accounted for and that will run obviously through to the end of the year as well. There are a couple of features in the labour cost. One is
the 76s are going out, so that's a good opportunity for us in respect of a fleet type moving out. That'll occur this half, so we'll -- as we look forward
into subsequent years, we really become quite efficient at gathering or growing capacity because we're just going to be adding 320s or 787s for
the foreseeable future. So I think there still remains good opportunity in the labour cost to ensure that we're capturing the scale available in growth.
Andy Bowley - Forsyth Barr - Analyst
Okay, great. Thanks Rob. So the second question around capacity growth, if we go back six months to capacity growth outlined for this year, you
gave some ranges. Capacity growth for the second half and therefore full year was right at the top end of those ranges for each of domestic, Tasman
and international long haul. Can you kind of give us a sense of what -- why the range six months ago or I guess more importantly, why are we at
the top of the range now, particularly given the broader competitive environment in the industry has probably become more challenging than
what you thought back then and then any kind of capacity expectations that you can give us that are beyond the end of the second half?
Christopher Luxon - Air New Zealand - CEO
Yes, so I mean we're well -- we're within the range that we thought, but as I said to you before, is that all our capacity adjustments are sensible.
They're really smart and are profitable. If you are other airlines, you often have loss making routes, right, and we don't. So when we're adding
capacity, we know exactly what we're doing. It's not mindless growth or profitless growth whatsoever. So that's been really important.
I mean if we just go around it, I mean domestic is incredibly strong. We're seeing really good growth obviously with inbound tourism being dispersed
across the country. We're seeing really big growth into quite a few big ports across New Zealand and obviously that's been a big part of it and
there's been some annualisation or some up-gauging benefits as we've gone into larger regional aircraft with those ATRs, et cetera. So -- but
domestically, New Zealand's in strong shape in terms of economically, tourism growth's robust and there's a truckload of events coming through
in the next six to nine months that will continue to make that be a good place for us to be.
In international, what we're seeing is increasingly -- you know, we're starting to see some of that competition moderate its capacity, but again the
capacity growth that we're putting in is profitable growth. So we're going to see -- we're going to continue to take opportunities where we see it
because if you look at domestic, we've got our best RASK performance despite a lot of capacity going in there and it's been a very smart move. So
yes, so I'm very comfortable with the settings that we've got. We're not -- as I said to you -- we just think differently about route profitability. We
don't just add routes for the sake of it. We do it purposefully, intentionally and in a very smart and make sure it's all profitable growth.
Andy Bowley - Forsyth Barr - Analyst
Great. Good to hear. Thanks Christopher and Rob.
Operator
Your next question comes from Owen Birrell of Goldman Sachs. Please go ahead.
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FEBRUARY 22, 2017 / 10:00PM, AIR.NZ - Interim 2017 Air New Zealand Ltd Earnings Call

Owen Birrell - Goldman Sachs - Analyst
Hi guys. Just a quick question on the Trans-Tasman routes. You were talking about ongoing competition in that space and obviously RASK fell quite
significantly during this half. Your outlook for flat RASK into the second half, I'm just -- what gives you your confidence there? Is there the potential
for increasing capacity to continue to place pressure on that?
Christopher Luxon - Air New Zealand - CEO
Yes, so I think the Tasman has been without doubt probably the toughest market sell that we see across the network at the moment. Obviously a
big part of that to be honest, the big driver is really the direct services from Auckland into the Middle East and that capacity staying in on the
Tasman has been probably the real challenge that we face there.
Having said all that, there are some really bright sparks for us. So this whole connecting Australia through New Zealand to the Americas north and
south has been very, very successful, much more successful than we anticipated and we continue to want to build that out over time as well. So
again, the Tasman is challenging. The Pacific Islands piece of that is a very big piece of strength. I mean outbound travel out of New Zealand has
been up about 9% and demand for those Pacific Island destinations has been very, very strong. So within Tasman PI you sort of have to differentiate
it and overall I think we've got very similar RASK in the second half as we had in the first half.
Owen Birrell - Goldman Sachs - Analyst
Can I just ask, on an internal accounting question, when you book a ticket from say Sydney through to LA via Auckland, how do you allocate the
revenue side of that ticket between the Trans-Tasman and the international route?
Rob McDonald - Air New Zealand Limited - CFO
Owen, it's Rob here. So we'll do it essentially based on what we call a pro rate agreement. So largely they're determined by mileage but there will
be other factors that we might bring into play, but it will end up in the Tasman route, the portion of that flight that's the sector on the Tasman and
then obviously the rest onto a long haul Pacific, but it generally sort of starts at a mileage base and then there can be some factors we bring in.
Owen Birrell - Goldman Sachs - Analyst
Just finally on the domestic environment, you said it's obviously very supportive with tourist in flows and a lot of events that you're seeing in the
next coming six months. I'm just wondering how the competitive landscape against say Jetstar is going in New Zealand?
Christopher Luxon - Air New Zealand - CEO
It's going very well for us is the short answer. It's been really good. I mean if you look at markets like say Auckland and Queenstown, we've had 25%
more capacity go into that market in the last year and it's been completely sold through really well and cleanly. So it's a very good result. So we're
very, very confident about our position in domestic New Zealand.
Rob McDonald - Air New Zealand Limited - CFO
I might just add in the turboprop market, that's a year on from Jetstar's entry into that market and we do feel it's sort of settled down now and has
turned out exactly as we expected and now we're bringing -- we're now on this long journey for over a year of bringing the ATRs and that's working
very well for us.
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FEBRUARY 22, 2017 / 10:00PM, AIR.NZ - Interim 2017 Air New Zealand Ltd Earnings Call

Christopher Luxon - Air New Zealand - CEO
Yes, I can think of many regional ports across the company where we've had a big influx of demand. Lower prices due to lower cost aircraft and
then really robust sustainable services being built out. So it's actually been -- that whole strategy as we talked about for regional New Zealand, our
response to Jetstar's entry, has all played out exactly as we expected.
Owen Birrell - Goldman Sachs - Analyst
So if things are settling down can we expect to see I guess rising load factors and more stable yields over the next six to 12 months.
Christopher Luxon - Air New Zealand - CEO
Yes, well I think the revenue environment for us in the next six months gets much improves and then it improves again I suspect in the first half of
next year as we lap the American entry in particular. But it's really going to be about how the market absorbs the supply with the demand and yes,
I think we're feeling -- we might be -- we probably think we're at the high water tide mark of new competitors coming into the market place and
in fact we're really encouraged by the fact that some of our competition is already starting to adjust capacity downwards. I mean you can look at
what's happening with United in our own JV and alliance. On North America you can look at what's happening with the Chinese carriers as well.
So look, yes, I mean we know it's still going to be tough but we are feeling good and we are feeling that the revenue environment will improve at
least in the next six months and then again the following six months after that.
Owen Birrell - Goldman Sachs - Analyst
Great, thanks guys.
Operator
Your next question comes from Andrew Steele of FNZC. Please go ahead.
Andrew Steele - FNZC - Analyst
Good morning Christopher and Rob. Just wondering if you could provide a little bit more colour on your thinking on the international yield trends
through the second half. I guess in particular I mean there would be a benefit from the Masters Games and the Lion tour. I mean how do you view
I guess an underlying trend excluding those events?
Christopher Luxon - Air New Zealand - CEO
Yes. So pretty stable to be honest. I think that's pretty stable would be my key takeaway.
Rob McDonald - Air New Zealand Limited - CFO
Yes, I'm just adding, the Lions tour and the Masters Games are probably as much around Trans-Tasman and domestic as anything else. But as we
look forward to the fourth quarter there, as Christopher mentioned just previously, there are some encouraging capacity adjustments occurring.
Then we go into the first half of next year and we see pretty well lapped just about everything and particularly the American entry and the additional
United capacity, which has now obviously shifted out to the end of that first half. So just a number of things happening that probably give us a
sense of a feeling of stability.
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FEBRUARY 22, 2017 / 10:00PM, AIR.NZ - Interim 2017 Air New Zealand Ltd Earnings Call

Andrew Steele - FNZC - Analyst
Okay, great and just one final one on unit cost trends. I guess on a ex fuel FX basis would you expect a similar decline that we saw in the first half?
I guess how sustainable are these gains that we saw?
Rob McDonald - Air New Zealand Limited - CFO
Yes, it's Rob here. Well I can't obviously give you an exact number that we're thinking about but the answer generally is yes. (technical difficulty)
without, yes, excluding fuel.
Andrew Steele - FNZC - Analyst
Thanks very much.
Operator
Your next question comes from Marcus Curley of UBS Investment Bank. Please go ahead.
Marcus Curley - UBS - Analyst
Good morning guys. A couple from me. I wasn't across the Chinese capacity changes which you were referring to, could you provide a little bit
more detail in terms of what's happening there?
Christopher Luxon - Air New Zealand - CEO
Yes, it's a -- so I can. I'm trying to think what it actually is that they've done. It's China Southern and China Eastern have both made changes in the
margins. China Southern I think has gone from 14 down to 10 services a week and China Eastern has also made adjustments as well and that's
encouraging because you know we had some challenges with the capacity of those competitors last year as well, staying in over that low part of
the season. So that's some more rationale behaviour which we're encouraged by.
Marcus Curley - UBS - Analyst
Great and just on new services from yourself. I suppose the only one that was previously flagged was Manila. Is that still on the cards for this year?
Christopher Luxon - Air New Zealand - CEO
Something we're watching and still in the frame but no real intention to move forward with that in the short term.
Marcus Curley - UBS - Analyst
Okay and just secondly, Rob I'm not sure if you've got this to hand but do you have the fuel usage in the first half and can you quantify the efficiency
savings that you got from the new fleet in that first half result.
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FEBRUARY 22, 2017 / 10:00PM, AIR.NZ - Interim 2017 Air New Zealand Ltd Earnings Call

Rob McDonald - Air New Zealand Limited - CFO
If you give me about 10 seconds. I think it was in the order of a per cent. Yes, so the volume increase of fuel was around 6%. So I guess given the
capacity increase of 7% we're talking about a percentage increase in fuel efficiency. That's sort of the trend we've enjoyed now for many periods.
Marcus Curley - UBS - Analyst
Great and then just finally guys, when you look at the full year guidance it implies I suppose at the midpoint about NZD150 million pre-tax for the
second half. If that's sort of the base level of profitability with all the competition in the market and fuel prices at $65, is there an easy way of
annualizing that? I was thinking if I could times that by three to get an annualized seasonally adjusted number so in other words at the end of the
financial year the business is producing an annualized profitability around NZD450 million. Is [EO] against that setting? Is that a reasonable
assumption?
Rob McDonald - Air New Zealand Limited - CFO
That's a heroic attempt at getting a 2018 forecast out of me but what I have said consistently, but it's always masked by what happens with fuel or
other things, is that the first half is stronger than the second half. And so from that perspective it's really difficult at this point.
Christopher Luxon - Air New Zealand - CEO
We've got a lot to work forward to on the second half to execute really well in order to do what we want to do in 2017, so I'm sure at the investor
day we'll have more visibility over that.
Marcus Curley - UBS - Analyst
Okay, thanks guys.
Christopher Luxon - Air New Zealand - CEO
Thanks Marcus.
Operator
Your next question comes from Matt Peek of Craigs Investment Partners. Please go ahead.
Matt Peek - Craigs Investment Partners - Analyst
Hi guys and congratulations on a strong result in trying circumstances. In particular on the costs side I'm just trying to understand some of -- the
permanence of some of these savings that you've made. Looking on a 7[%] ASK basis some of the items in the first half compared to both first half
last year and second half sales and marketing looks like there's been about a 10% saving on PCP on an ASK basis. Then a lot of the other categories
are sort of down as well.
Is the run rate into the second half going to be in line with first half? Are you seeing continued benefits or in some of these categories were there
savings that you made in the first half that won't flow into second half? I know you've addressed things like maintenance and labour costs, but in
some of the other categories can you just allude to whether you're going to see those costs stay at these levels?
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FEBRUARY 22, 2017 / 10:00PM, AIR.NZ - Interim 2017 Air New Zealand Ltd Earnings Call

Rob McDonald - Air New Zealand Limited - CFO
Matt it's Rob here. So I did talk about labour and mentioned yes, we did expect that to go through and also maintenance. So just to touch on sales
and marketing, the previous year was a big year for sales and marketing. It had a number of route launches as well as a very big campaign in New
Zealand which was our first master brand for a number of years, so that was expected we'd dial back that, particularly on media. So we will see that
sort of -- that's -- what you're seeing is by and large pretty well a new level for the sales and marketing. So in summary, yes, we think it will travel
through to the second half.
Matt Peek - Craigs Investment Partners - Analyst
Okay, thank you.
Operator
(Operator instructions). Your next question is a follow up question from Owen Birrell of Goldman Sachs. Please go ahead.
Owen Birrell - Goldman Sachs - Analyst
Hi guys. Just on the China New Zealand route, I'm just interested by those comments about China Southern and China East and lowering capacity.
Can you give us a sense of what yields did on that route over the last half and what do you expect to see into the next half?
Christopher Luxon - Air New Zealand - CEO
No, we're not probably prepared to do that but yes, I mean suffice to say on the way we're thinking about China is -- one is that obviously our
business into Shanghai has been over the last three years all about trying to get more premium travellers onto services. And we've been doing
that through different marketing campaigns with different trade partners. 80% of our customers actually are free and independent travellers that
are spending eight days or more in New Zealand.
So we focus very much on Shanghai so there is some Chinese activity or competitive activity that don't impact us so much and we really are very
fixated on free and independent travellers rather than group travel which is lower yielding obviously for a lot of our competitors.
Owen Birrell - Goldman Sachs - Analyst
I take from that comment that yield would have been substantially compressed over the past six to 12 months.
Rob McDonald - Air New Zealand Limited - CFO
Matt it's Rob here. I mean well clearly with that much influx of capacity that we certainly have seen lower yields without a doubt. But it's fair to say
we have a, as Christopher mentioned -- sorry, Owen -- as Christopher mentioned that both our makeup from China but also our portion of outbound
from New Zealand is higher than most. So we certainly haven't suffered what we've seen general fares from other carriers do.
The other point I would make about them adjusting themselves in the fourth quarter of this year and it will flow through to the first quarter next
year, is that is entirely sensible given the low season nature. And the surprise to us a year ago was they didn't do it and that made it pretty tough
a year ago, so we're much more encouraged now that we'll see a more sensible capacity environment in the low season.
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FEBRUARY 22, 2017 / 10:00PM, AIR.NZ - Interim 2017 Air New Zealand Ltd Earnings Call

Christopher Luxon - Air New Zealand - CEO
And still relatively a small part of our overall flying ASKs and part of our network really, while strategically important, still relatively small.
Owen Birrell - Goldman Sachs - Analyst
Thanks guys.
Operator
Your next question is a follow up question from Nick Mar of Macquarie. Please go ahead.
Nick Mar - Macquarie - Analyst
Just one more. I guess at a very high level what kind of changes to the backdrop around competition and fuel prices and everything would you
need to see to be in a position to start growing yield again?
Christopher Luxon - Air New Zealand - CEO
Well I think we are feeling better now than we did at the beginning of the year around the revenue environment in general. We think the competition
is probably as much as it's been. There might be some new things coming in on the margins but at the end of the day it's sort of hitting that high
tide water mark. I think we're feeling each six month period it improves for us and we'll see a step up in long haul I think in the first half of 2018
which is with the -- once we start to lap the American entry in July and August.
So I think for us we are positive. We are feeling good about it. We think each six month period it will get better for us. But we've got a lot of work
to do to make sure we execute incredibly well.
Nick Mar - Macquarie - Analyst
So would you say that given where fuel prices have risen to and the kind of profitability hit that is starting to come through, that's enough for
people to start looking to try and push prices up at the moment?
Rob McDonald - Air New Zealand Limited - CFO
Nick, it's Rob here. I think at an industry level that move is significant enough to certainly put people on their back heels as far as capacity growth
goes as we look into subsequent years and certainly we're seeing that in the wide-body order market, and people deferring.
But from areas we've seen growth from, from China, the Middle East, it's hard to understand where they're going sometimes with capacity. And
things like ultra-long-haul flying, it's questionable how you make money on that anyway.
Nick Mar - Macquarie - Analyst
Thanks. Thanks, guys.
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FEBRUARY 22, 2017 / 10:00PM, AIR.NZ - Interim 2017 Air New Zealand Ltd Earnings Call

Operator
Your next question is a follow-up question from Matt Peek of Craigs Investment Partners. Please go ahead.
Matt Peek - Craigs Investment Partners - Analyst
Hi, guys, again. I appreciate that ultimately it's a Board decision but can you provide some insights as to how the Board is thinking about the current
level of dividends based on I guess the current run-rate profitability and going into FY18, I think we're looking at a circa 70% payout ratio. Do you
think that there's comfort that profitability is at a level where the current dividend can be maintained and then grown over time?
Rob McDonald - Air New Zealand Limited - CFO
Matt, it's Rob here. So just a couple of things. Last year we talked about consistent and sustainable, and I think -- and on numerous occasions we
talked about the dividend setting being something that was done but looked completely through 2016 as an abnormal year, and that's important.
We've had a very strong first half from our perspective and then we look in the medium term as we head towards the end of this fleet reinvestment
and now we're down to increments of growth, and so from that perspective the fleet CapEx falls off and in a period that really starts in 2019 and
beyond we start to go into a stronger free cash flow environment. So there are a number of things we think about and look at, but each time we'll
make the decision then, so I can't really give you any crystal ball into the future on it.
Matt Peek - Craigs Investment Partners - Analyst
Thanks.
Operator
There are no further questions at this time. I'll now hand back to Mr. Luxon for closing remarks.
Christopher Luxon - Air New Zealand - CEO
Well guys, if I can just thanks so much for everyone taking the time to get on the call and listening to our story today. Again, as you know, if you'd
like to schedule a call or to have a meeting with any of thus, please direct those requests through the investor relations team and to Leila.
And operator, that concludes our call. Thank you.
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FEBRUARY 22, 2017 / 10:00PM, AIR.NZ - Interim 2017 Air New Zealand Ltd Earnings Call

Air New Zealand Investor Update (Op Stats) – January 2017 Disclosure of Director and Senior Mngrs Relevant Interests

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