AIR New Zealand's net profit fell 1 percent for the fiscal year, it said yesterday, after twice downgrading its earnings level during the year as it struggled to control the effects of rocketing jet fuel prices.

For the year ended June 30, the carrier's net profit dropped to NZ$218 million (US$152 million) from NZ$221 million last year.

Operating revenue rose 9.1 percent to NZ$388 million from the same period last year to NZ$4.7 billion.

The revenue increase was primarily due to extra capacity added to its domestic and long haul airlines and higher load factors, up 2.8 percentage points to 79.3 percent, the 76-percent government-owned carrier said in a statement.

But normalized earnings before unusual items and tax were down 24 percent at NZ$197 million. The company said the figure, that complies with new accounting standards, was a better indication of the annual result.

The airline carried 13.2 million customers, up 5.6 percent on the previous year, and cargo revenue rose 12 percent.

"The cost of fuel increased by NZ$300 million in the past year," Air New Zealand Chairman John Palmer said, adding the airline's strong operating performance had enabled it to deliver a solid profit against a backdrop of record fuel prices.

"Despite fare increases, Air New Zealand continues to only partially recover the rise in the total cost of fuel," Palmer said.

The second half of the 2008 financial year marked the start of a period of substantial adjustment in commercial aviation and 2009 looks set to bring more changes, he said.