Air New Zealand posted a 17.5 percent fall in annual net profit Wednesday as increased competition hit the carrier's bottom line.

The airline said net profit for the 12 months to June 30 was NZ$382 million ($278 million), down from a record NZ$463 million in the previous financial year.

Air New Zealand said it was still the second-highest figure ever recorded by the airline, describing it as a "strong" result.

"This year Air New Zealand faced an unprecedented increase in the level of competition from some of the world's largest airlines and effectively rose to the challenge," chief executive Chris Luxon said.

"The impressive way our team responded to the new competition while at the same time achieving commercial, customer and cultural excellence, helped to deliver our second highest profit ever."

Pre-tax earnings also dipped 20.5 percent to NZ$527 and operating revenue was off 2.3 percent at NZ$4.4 billion.

The company said it was "optimistic about the overall market dynamics" and aimed to improve its earnings in the current financial year.