Air New Zealand Ltd said on Thursday it expected fiscal 2018 earnings before tax to exceed the previous year, boosted by strength in the domestic market and robust inbound tourism while also announcing a dividend hike.

The airline reported a profit before tax, the most closely watched measure of its performance, of NZ$323 million (US$237.70 million) for the six months ended Dec. 31, down from NZ$349 million a year ago as higher fuel prices dampened profits.

Still, the company said it was on track for the second highest annual profit in company history.

"The domestic market continues to show strength driven by the New Zealand economy as well as inbound tourism, and we will be increasing capacity approximately 6 percent across our regional and jet services to support that demand over the second half of the financial year," Chief Executive Christopher Luxon said.

The airline said it would pay an interim dividend of NZ$0.11 per share, up from NZ$0.10 a year ago and the highest interim payout in the company's history.

It also announced plans to launch a new direct service to Taipei, beginning November 2018.

Shares of the company soared to a 16-year high last year underpinned by growth in passenger numbers.