New Zealand's national airline has reported a 17 percent drop in profit from last year but says it's risen to the challenge of increased competition.

Air New Zealand on Wednesday announced an after-tax profit of 382 million New Zealand dollars ($276 million) for the year ending June, compared with NZ$463 million last year.

Revenue was down 2 percent from last year to NZ$5.15 billion.

Chairman Tony Carter says it's a strong result. He says the board felt it appropriate to increase the dividend slightly due to the airline's strong financial position and improving trading environment. About 8,500 staff also got bonuses of up to NZ$1,700.

Chief Executive Christopher Luxon says the company faced an unprecedented increase in competition over the financial year but had met the challenge.