Wellington, Sept 23 NZPA - Air New Zealand defended its executive pay rates today at an annual meeting at which it received bouquets as well as brick bats from shareholders.

Shareholders praised chief executive Rob Fyfe's leadership in the aftermath of the crash of an Air NZ Airbus A320 on a test flight off France in November, in which five New Zealanders died.

But they berated the company for the lack of leg room on short haul flights and asked if empty front row seats on domestic flights were kept vacant for politicians.

Mr Fyfe said the rows at the front of domestic aircraft had greater space and were used by customers who paid higher, more flexible fares, but were not reserved for any particular class of customer.

One shareholder said the company's advertising campaign in which Mr Fyfe appears in body paint was tacky.

Chairman John Palmer said the 26 percent fall to $145 million in normalised annual profit was among the top performances by an airline during the global economic meltdown but it did not deliver an acceptable return to shareholders.

He said surveys showed employees -- Air New Zealanders -- were committed to their company, which he attributed to the leadership of Mr Fyfe and the quality management team.

He said there had been a lot of public comment about executive remuneration.

Mr Fyfe received a base salary of $1.2m and $1.24m in incentive payments for the 2009 financial year, according to the annual report.

"In the case of Air New Zealand we are fortunate to have an outstanding executive team with an outstanding leader," Mr Palmer said.

"The remuneration of our CEO reflects that. While it is one of the larger executive packages in New Zealand, it is carefully constructed around performance and has a large element at risk in both the short and medium term," he said.

Mr Fyfe said he began his career at Wigram in Christchurch, where the annual meeting was held, in the Air Force as a 17-year-old aircraft engineer.

Mr Palmer said new ideas and strategies were needed to return the airline to acceptable profitability. One of the strategies was to grow non-airline revenue, including in the engineering business.

Mr Fyfe said the airline was reviewing its network and product offering and "during this time of inevitable change we are prepared to make some tough decisions to ensure that our business is sustainable".