GE loses out on huge Air NZ contract

By NZPA

Tuesday 10th December 2002

Air New Zealand today confirmed General Electric has missed out on an engine purchase contract worth around $US100 million ($NZ200 million) for its new Airbus aircraft.

A GE engine was involved in the emergency landing of an Air NZ flight from Brisbane on Sunday.

Air NZ, which plans to buy up to 15 new Airbus A320s, announced today it had selected International Aero Engines' (IAE) V2500 engine for the new planes.

A spokeswoman confirmed General Electric had tendered for the engine deal, but stressed the choice had involved a number of factors, including price.

She would not say if Sunday's incident affected the decision.

Air NZ's senior vice president of operations and technical, Craig Sinclair, said the V2500 engine had emerged a clear winner after "an extremely thorough evaluation of technical, commercial and engine support options".

While Air NZ said the cost of the engine deal was confidential, it said the engine generally made up about a quarter of an aircraft's cost. The project for the first 15 aircraft is valued at around $US400 million ($NZ804 million).

Air NZ has bought 15 Airbuses with options on another 20 over the next 10 years, the first of which is due to arrive in October next year. The single-aisle A320 carries 146 passengers -- 8 in business class and 138 economy passengers.

They will replace four Boeing 767-200s which include the plane involved in Sunday's incident and nine Boeing 737-300s used to fly the Tasman and to Pacific Island destinations.

Also announced today was a $50 million overhaul and repair contract for the new engines to the Christchurch Engine Centre.

The maintenance contract spans 10 years and is expected to create at least 100 new jobs.

Air NZ emphasised the Christchurch Engine Centre, a joint venture between Air NZ and international engine company Pratt & Whitney, was not connected to its own engineering service, which has come under scrutiny for several recent parts problems.

The centre welcomed the contract and it would open the door to servicing other V2500 operators as well.

When the Airbus purchase was first announced in July, it was initially seen as a strong stand of independence by Air NZ in the face of competition from Qantas.

But analysts have since pointed out that Qantas was also buying Airbuses and any alliance would involve compatible aircraft.

Since the Airbus deal was announced, Air NZ and Qantas have mounted a bid for regulatory clearance to start an business alliance.

Other benefits of buying the Airbus planes are cheaper operating costs and greater passenger capacity. Analysts also suspect that Air NZ bought the craft at a bargain post-September 11 price.

"The options on the aircraft are important because they lock in the purchase price at current depressed prices, and will enable Air NZ to replace its entire Tasman and short-haul fleet over the next 10 years," one analyst told NZPA.

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