Air New Zealand expects its airline business to remain profitable in the second half of the year after posting an after-tax earnings of $64 million with an operating revenue of $2.1 billion.

The airline's passenger demand dropped by 4.6 percent, while passenger load factor was up three percentage points to 81.6 percent.

"In very challenging conditions this is a good result," says Air New Zealand Chairman John Palmer, in a statement.

"The fallout from the global financial crisis continued to make operating conditions extremely difficult.

This has been reflected in lower passenger numbers, cargo volumes and yields, resulting in a 15 percent reduction in revenues."

"At the same time, fuel prices have returned to more stable levels following unprecedented volatility in the 2009 financial year," Mr. Palmer says.

"Delivering a profit during this time is a reflection of the management team's focus on closely aligning capacity with demand and their ability to deliver innovative solutions to significantly enhance the airline's competitive position."

Air New Zealand Chief Executive Officer Rob Fyfe says the result reflects the considerable efforts of more than 10,500 Air New Zealanders and their continued focus on delivering world-class results.

"Those efforts were recognized with the recent Air Transport World Airline of the Year Award and are reinforced by the airline's strong performance in the first half of this financial year," says Mr. Fyfe.

"We worked hard to adapt the business to reflect the lower revenue base. As a result, we achieved an 11 percent reduction in non-fuel operating costs, with all operating costs reduced."

Mr. Fyfe says innovation remains a key theme for the year ahead. "We have set out to create a culture that enables Air New Zealanders to have the confidence to think outside the square, and to proactively and creatively pursue solutions."