Air New Zealand today signed agreements to acquire eight new Boeing 777-200 ER and two Boeing 7E7 aircraft as well as rights to purchase a further 42 long-haul aircraft. Given the size of the transaction, under Stock Exchange and Companies Act rules, Air New Zealand will be required to seek shareholder approval.
Air New Zealand’s Managing Director and Chief Executive, Ralph Norris, says the Boeing aircraft will provide the airline with new capabilities for its long haul operations.

“These aircraft will allow us to develop new routes and increase frequency on existing routes as well as provide an overall increase in both passenger and cargo capacity. Another benefit is that the new fleet will provide Air New Zealand with lower operating costs and improved financial performance over and above that which could be achieved by expanding the existing fleet of 10 Boeing 767s,” Mr Norris says.

Four of the new 300-plus seat Boeing 777-200 ER aircraft will be purchased and the other four leased from International Lease Finance Corporation. The cost of the four aircraft and the necessary infrastructure to maintain the fleet of eight is in excess of NZ$1-billion.

The interiors for these new aircraft will mirror the soon-to-be unveiled upgrade for
Air New Zealand’s Boeing 747s.

The eight Boeing 777-200 ER aircraft will begin entering service in September 2005, with the first five expected to be delivered by April 2006. The final three aircraft will be introduced in the last half of 2006. All the aircraft will be powered by Rolls Royce Trent 800 series engines.Ê

Mr Norris says the decision to purchase the Boeing 777-200 ER and 7E7 represents the next phase in Air New Zealand’s commitment to transforming its business. The first phase was the introduction of Domestic Express, Tasman Express and Pacific Express and the corresponding introduction of its new Airbus A320 fleet.

The delivery date for the two 7E7 aircraft, which will be capable of carrying approximately 230 customers, is still to be determined, but it will coincide with the retirement from service of the remaining 767s. The cost of the two aircraft and necessary infrastructure to support them is in excess of NZ$350 million.

Air New Zealand’s 7E7s will be powered by the revolutionary new Rolls Royce Trent 1000 engine. Air New Zealand is the first airline in the world to place an order for engines to power the new Boeing 7E7.

“The decision to commit to the 7E7 and the Rolls Royce Trent 1000 is a clear signal of where Air New Zealand is positioning itself - innovative, efficient and delivering the best products to customers,” says Mr Norris.

The Boeing 7E7 will use up to 20 percent less fuel than other aircraft of its size.Ê It will travel at speeds similar to today’s fastest wide bodies and feature innovative technology that will give passengers great comfort.Ê

The Boeing 7E7 will also carry up to 50% more cargo than today’s similar size aircraft.

Boeing’s Senior Vice President International Sales Doug Groseclose says the 777 and 7E7 families of aircraft are going to help Air New Zealand “change the game in the South Pacific.”

“By choosing Boeing for its future wide-body fleet, Air New Zealand will lift the bar for passenger comfort and choice and operating efficiency. These two aircraft will give Air New Zealand tremendous flexibility in terms of great onboard service and the ability to profitably open new routes,” Mr Groseclose says.

Mr Norris says Air New Zealand’s decision to secure rights to purchase a further 42 aircraft reflects the airline’s belief in the potential to expand its passenger and cargo business into new long haul destinations and increase traffic from existing core routes.

“The purchase rights will give us the ability to choose from a range of aircraft types that best suit our long haul business as it develops in the future. The aircraft options will include the Boeing 777-200 ER, 777-200 LR, 7E7 and the 777-300 ER, which could replace our Boeing 747s in about a decade,” he says.

Air New Zealand’s long haul fleet currently comprises of ten Boeing 767s and eight Boeing 747s. By early 2007 the fleet composition is expected to be eight 777-200ERs, seven 747s andÊ five 767s, as leased aircraft will be returned as contracts expire.

To put this into a passenger and cargo context, Air New Zealand’s long haul fleet currently consists of 5408 available seats and 268 tonnes available capacity across 18 aircraft.

By early 2007, the fleet will consist of 6466 available seats and 291 tonnes available capacity across 20 aircraft. This represents a 20% increase in seats for long haul aircraft.

Mr Norris says this growth is consistent with the airline’s capacity growth goal of 5 percent, given the network base year of 2003.

“A low growth network scenario has also been modelled. The firm commitment to aircraft that has been announced represents a minimum of aircraft that will be required by Air New Zealand going forward, and also falls below the amount that would be required under a low growth scenario,” he says.

“We expect to fill the increase in seats and cargo capacity by flying to new destinations, increasing frequency on current destinations and stimulating new demand.”

Mr Norris says that a team of senior managers has spent the past 18 months conducting an exhaustive evaluation of the aircraft options available from both Boeing and Airbus. The Air New Zealand Board has been regularly updated during the process.

“The intensive and robust evaluation process highlighted that both the manufacturers’ products were capable of meeting Air New Zealand’s requirements.ÊBut on balance the Boeing aircraft best fits our long haul and business needs.

“This same exhaustive process two years ago found that the Airbus A320 was the best fit for our short haul needs and as expected the aircraft is performing to expectations and has proven to be the right choice for the airline.”

Mr Norris says that Air New Zealand looks forward to continuing to work closely with Boeing and Airbus as it seeks to consolidate and grow its business in both the short haul and long haul markets.
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