Overview. > Normalised earnings* before taxation of, up 30% > Statutory earnings before taxation of, up 40% > Statutory net profit after taxation of

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2 Overview > Normalised earnings* before taxation of, up 30% > Statutory earnings before taxation of, up 40% > Statutory net profit after taxation of > Operating revenue of > Strong operating cash flow of > Third consecutive year of earnings growth * Normalised earnings represents Earnings stated in compliance with NZ IFRS (Statutory Earnings) after excluding net gains and losses on derivatives that hedge exposures in other financial periods. Refer to the supplementary slides for a reconciliation to IFRS earnings. 2

3 Key drivers of result > Passenger revenue to > Short haul capacity growth of > Yield improvements across the network of > Increased labour cost includes restructuring and fleet transition costs of > Decreased fuel cost due to more favourable hedging outcomes, fleet efficiencies and slightly lower underlying prices Passengers carried ( 000s) 13,719 13, % Available seat kilometres (ASKs) 33,396m 33,167m 0.7% Revenue passenger kilometres (RPKs) 28,078m 27,733m 1.2% Load factor 84.1% 83.6% 0.5 pts Yield (cents per RPK) % * Excluding impact of foreign exchange 3 ** Calculations based on numbers before rounding

4 Strong operating cash flow > Pretax operating cash flow > Increased tax payments of > Reflects quality of underlying earnings > Underpins strong liquidity position 4

5 Changes in profitability *Normalised earnings before taxation represents Earnings stated in compliance with NZ IFRS (Statutory Earnings) after excluding net gains and losses on derivatives that hedge exposures in other financial periods. Refer to the supplementary slides for a reconciliation to IFRS earnings. 5

6 Domestic > Continued strong performance with increased traffic and improving yields > Capacity as new aircraft enter fleet A320 now outnumbering B by, fleet transition complete by end of ATR72-600s now in service, with 5 more to come in the next 18 months > New Domestic fare proposition offering well received by customers Passengers carried ( 000s) 8,920 8, % Available seat kilometres (ASKs) 5,385m 5,108m 5.4% Revenue passenger kilometres (RPKs) 4,370m 4,218m 3.6% Load factor 81.1% 82.6% (1.5 pts) Yield (cents per RPK) %** * Calculations based on numbers before rounding ** Excluding the impact of foreign exchange, Domestic yield increased by 3.4% 6

7 Tasman & Pacific Islands > Maintaining market leading position on the Tasman > Capacity increases from up-gauge to larger aircraft > Lower AUD impacting Australian derived revenue Passengers carried ( 000s) 3,277 3, % Available seat kilometres (ASKs) 10,622m 10,277m 3.4% Revenue passenger kilometres (RPKs) 8,858m 8,580m 3.3% Load factor 83.4% 83.5% (0.1 pts) Yield (cents per RPK) (2.6%)** * Calculations based on numbers before rounding ** Excluding the impact of foreign exchange, Tasman & Pacific Islands yield increased by 1.0% 7

8 International > First of two additional leased B ER aircraft now in service > Some capacity reduction due to withdrawal of Hong Kong-London route > Arrival of B787-9 and exit of B > Full year benefit of realigned long haul network Passengers carried ( 000s) 1,522 1,536 (0.9%) Available seat kilometres (ASKs) 17,389m 17,782m (2.2%) Revenue passenger kilometres (RPKs) 14,850m 14,935m (0.6%) Load factor 85.4% 84.0% 1.4 pts Yield (cents per RPK) %** * Calculations based on numbers before rounding ** Excluding the impact of foreign exchange, International yield increased 3.5% 8

9 Cargo > Yields down in flat global market, offset by volume growth of > Pursuing innovative solutions through development of global virtual network > A key enabler for New Zealand s exporters 9

10 Financial management > Net cash on hand > Gearing at > Fully imputed final dividend of, resulting in an increase in ordinary dividends for the year of > Fully imputed special dividend of > Moody s investment grade credit rating, outlook stable 10

11 Virgin Australia update > Equity investment increased to > Air New Zealand Chief Executive Officer appointed to Board, 4 July 2014 > Alliance continuing to improve network proposition > Ongoing cost benefits through operational synergies 11

12 Progress on strategic priorities Exits of HK-London, Auckland-Osaka Singapore Airlines alliance New aircraft deliveries (A320, B787, B777, ATR) Airbus NEO order Lounge upgrades, mobile technology improvements Improving sales capability Simplification initiatives High performance engagement & leadership development > > > > > > > Improved performance + Network reach + Efficiencies + Engaged customers + Economies of scale + Competitive cost base + High performing team = 12

13 Network capacity growth in FY14 > Capacity (ASKs) is expected to grow by during FY15 *Excluding the impact of exits from Hong Kong-London and Auckland-Osaka routes 13

14 Singapore Airlines alliance > Full regulatory approval granted > Recommence flying to Singapore from Auckland > Will boost route capacity by around over time > Expansive network available to customers > Brings to life Pacific Rim growth focus 14

15 Aircraft capital expenditure $NZm > Investment of in aircraft over the next 4 years > Includes progress payments on aircraft > Assumes USD/NZD = > Excludes capitalised maintenance of approximately and non-aircraft capital commitments FY15 FY16 FY17 FY18 FY19 Boeing Airbus A Airbus A320/A321 NEO ATR Boeing ER* * Subject to operating lease arrangements 15

16 Customer > Mobile app proving very popular with more than > Mobile device sales channel growing significantly > Upgraded inflight product offerings with B787-9 and refurbished B > Lounge upgrades progressing well 16

17 Loyalty > Programme refresh completed > Airpoints membership engagement year-on-year highest in more than 5 years > Non-air revenues year-on-year > High Value Customer satisfaction levels at all time highs > Significant insights project undertaken, providing single customer view 17

18 Continuous cost improvement > Current year includes of transitional labour costs (0.13 cents per ASK) > Fleet modernisation, fleet simplification and scale economies from growth will continue reducing our cost base in the future > Objective to offset CPI increases on cost base Cost per ASK* Exclude: Fuel (3.42) (3.63) Foreign exchange gains CASK (excl. fuel and foreign exchange gains) * Includes normalised earnings adjustment 18

19 Financial reporting update > Virgin Australia investment will be equity accounted in FY15 > Air New Zealand an early adopter of NZ IFRS 9 Financial Instruments (2013) Effective 1 July 2014 Better alignment of accounting with risk management strategies Will reduce accounting ineffectiveness in respect of fuel hedge relationships and remove earnings volatility in respect of the time value of options and forward element of foreign currency operating hedges Normalised earnings disclosure likely to be discontinued in FY16 19

20 Outlook > The coming year will see significant capacity growth as new fleet arrive. > As we continue to deliver on our strategic priorities, and based on our expectations of market demand and fuel prices at current levels, we expect to improve on the 2014 result in the coming year. This outlook excludes equity earnings from the Virgin Australia shareholding. 20

21 SUPPLEMENTARY SLIDES 21

22 Financial overview Operating revenue $4,663m $4,615m $48m 1% Normalised earnings * before taxation Statutory earnings before taxation Statutory net profit after taxation $332m $255m $77m 30% $357m $255m $102m 40% $262m $181m $81m 45% Operating cash flow $730m $750m ($20m) (3%) Net cash position $1,234m $1,150m $84m 7% Gearing 42.9% 39.3% n/a (3.6 pts) Ordinary dividends declared ^ Special dividend declared ^ 10 cps 8 cps 2 cps 25% 10 cps n/a n/a n/a * Normalised earnings represents Earnings stated in compliance with NZ IFRS (Statutory Earnings) after excluding net gains and losses on derivatives that hedge exposures in other financial periods. Refer to the supplementary slides for a reconciliation to IFRS earnings. ^ Fully imputed 22

23 Projected jet fleet Boeing ER Boeing ER Boeing Boeing Airbus A Airbus NEO Boeing * Seat weighted 23

24 Foreign exchange hedging > The first half of FY15 US dollar operating cash flow exposure is approximately at an average NZD/USD rate of > The FY15 US dollar operating cash flow exposure is at an average NZD/USD rate of

25 Fuel hedging* > The first half of FY15 is > The second half of FY15 is Brent swaps 175, WTI swaps 75, Brent collars 2,287, WTI collars 275, Sing Jet swaps 112, WTI swaps 175, Brent collars 1,512, WTI collars 200, * Fuel hedge position as at 15 August

26 Normalised earnings Earnings before taxation (per NZ IFRS) $357m $255m Reverse net (gains) / losses on derivatives that hedge exposures in other financial periods: Fuel derivatives ($22m) ($2m) Foreign exchange derivatives ($3m) $2m Normalised earnings* before taxation $332m $255m *Normalised earnings represents Earnings stated in compliance with NZ IFRS (Statutory Earnings) after excluding net gains and losses on derivatives that hedge exposures in other financial periods. Normalised earnings is a non-ifrs financial performance measure that matches derivative gains or losses with the underlying hedged transaction, and represents the underlying performance of the business for the relevant period. Normalised earnings is reported within the Group s annual financial statements and is subject to review by the Group s external auditors. 26