Air New Zealand expands fleet with up to 35 Airbus planes

By NZPA

Thursday 4th July 2002

Air New Zealand is buying up to 35 new Airbus aircraft for its short-haul international fleet, which it says will cost little more than its current arrangements with Boeing.

Today's announcement of the acquisition of 15 new Airbus A320 aircraft, and rights to buy a further 20 planes, was a strong statement of independence from the airline which is still drawing back from the brink reached last year before it was rescued by the Government.

Air NZ chairman John Palmer told reporters the decision to change the mix of its short-haul fleet was part of a rebuilding programme launched several months ago.

"Despite the difficulty the company's been through, it's been necessary for us to continue to focus on the business ahead and to look to build a competitive airline for the future.

"When I took over this job the thought that we would be standing here today and making an announcement of this sort of level was almost unthinkable."

Mr Palmer also fired a salvo at Qantas, which is seeking a minority stake in Air NZ as it struggles to return to profitability.

"This should be seen as a sign of Air NZ determining its own future, and any other relationships we have other partners will be predicated on us having a business we think is in our interests ..."

Chief executive Ralph Norris said Air NZ had received no formal offer from Qantas. "We're still in discussions with Qantas on a number of matters, and certainly no decision has yet been made in that regard."

Air NZ said shareholders will not have to be called on to finance the acquisitions, which will be secured against the aircraft and are not expected to affect the company's debt levels.

Air NZ has a capital investment budget of more than $US400 million ($NZ827.8 million).

The new aircraft will replace leases that will have run their full term. Air NZ will have to pay an extra $1.5 million a year for the Airbus planes, although operational benefits such as extra seats and cheaper running costs were expected to offset that.

One analyst said Air NZ was buying the new aircraft at bargain basement prices, as to be expected against the background of the depressed airline industry post-September 11.

"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," he told NZPA.

"The current price for A320s is $US37 million each, implying that Air NZ has acquired a 35 percent to 40 percent discount on aircraft and simulators."

Five of the planes may have been originally destined for Qantas' fleet, the analyst said.

"Also if a deal between Air NZ and Qantas is completed, the new fleet order is compatible with the 13 A330s that Qantas is going to take delivery of."

Mr Norris said Air NZ chose Airbus ahead of Boeing mainly for economic reasons, although the planes were also wider with more seating capacity.

The airline currently uses a mix of Boeing 767 and 737 aircraft on the short haul international services, which it will retain on the long-haul and domestic routes.

The 15 initial aircraft will replace four Boeing 767-200 aircraft currently being retired from the fleet, and nine Boeing 737-300s being retired between September 2003 and December 2006.

Consolidation of a single type of aircraft will simplify both operation and support service requirements, although pilots and engineers will have to be retrained.

"Introducing Airbus A320 aircraft to our fleet will expand our engineering capability and enable our ANZES engineering unit to increase its range of third party contract services," Mr Norris said.

Five of the aircraft will be acquired from leasing company Gecas under standard operating lease arrangements.

Ten of the new A320 aircraft, a simulator, spares and some other items are still being acquired through purchase and leasing arrangements, yet to be determined by the Air NZ board.

The first of the new aircraft will join the fleet at the end of October 2003, and the 15th is scheduled to be delivered at the end of 2006.

The airline can decide if it will purchase the aircraft as A320s, which can carry containerised cargo, the larger A321 aircraft, or the smaller A319 model. It is under no obligation to purchase the additional 20 aircraft.

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