Air New Zealand is acquiring 15 new Airbus A320 aircraft and purchase rights on a further 20 A320 aircraft, exercisable over the next 10 years, under an agreement signed with Airbus today.

“We are bringing in a new aircraft type to support a strategic change in the service and products we will be offering to short-haul international travellers on Air New Zealand`s Tasman and South Pacific routes,” the Managing Director and CEO of the Group Ralph Norris said in announcing the A320 acquisition deal.

“The Airbus aircraft will give us new capabilities for our short-haul international operations in terms of range, passenger and cargo carrying capacity, seat and cabin configurations, and in-flight services.

“We currently use a mix of Boeing 767 and 737 type aircraft on our short-haul international services and consolidation on a single type aircraft will simplify both operation and support service requirements.

“Introducing Airbus A320 aircraft to our fleet will also expand our engineering capability and enable our ANZES engineering unit to increase its range of third party contract services.

“At this time, we envisage continuing to use Boeing aircraft for Air New Zealand domestic and long-haul international services,” Mr Norris said.

Ten of the 15 A320 aircraft, a simulator, spares and other associated items are being acquired via a combination of purchase and leasing arrangements still to be finally determined by the Board of Air New Zealand within a capital investment budget in excess of US$400 million. Five of the aircraft will be acquired from the leasing company GECAS under a standard operating lease arrangements.

The first of the new A320 aircraft will be inducted into the Air New Zealand fleet at the end of October next year, and the 15th aircraft is scheduled to be delivered towards the end of 2006.

These aircraft will replace four Boeing 767-200 aircraft that are currently being retired from the Air New Zealand fleet and nine Boeing 737-300 aircraft that will be progressively retired from the fleet between September 2003 and December 2006.

The purchase of the new aircraft will have a net positive impact on Air New Zealand`s financial performance as the enhanced operating efficiency of the new aircraft, and increased seat numbers, more than offset the cost of incremental capital employed in the new fleet.

Financing for the acquisition will be secured against the aircraft and is not expected to affect the Group`s gearing levels. The acquisition can be financed without any recourse to the shareholders.

The A320 is well suited to Air New Zealand`s needs in the Tasman and short-haul Pacific markets, with more seating capacity than the Group`s existing fleet of Boeing 737 and 767 type aircraft. The A320 is capable of carrying containerised cargo and has a greater range than the 737-300 making it a better fit for the missions required by the regional market.

Under the terms of its agreement with Airbus, Air New Zealand has the right to switch between the A320 aircraft and either the larger A321 aircraft or the smaller A319 aircraft prior to delivery, should market conditions change. If this right is exercised, financial terms would be adjusted accordingly.

In addition to its commitment to acquire the 15 aircraft, Air New Zealand has secured purchase rights on a further 20 Airbus aircraft at agreed prices in the future. These rights lock in prices based on current market conditions for future acquisitions by Air New Zealand without any fixed obligation to purchase. These arrangements provide the Group with the ability to replace its entire Tasman and short-haul Pacific fleet within the next decade.

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