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1279shp
2nd Jun 2004, 06:23
From an NZ reporter in a US financial newspaper

Air N.Z. to Add Boeing Planes for More Than $849 Mln (Update7)
June 2 (Bloomberg) -- Air New Zealand Ltd., the nation's largest airline, will buy six Boeing Co. aircraft and lease four more at a cost of more than NZ$1.35 billion ($849 million), seeking to cut fuel costs and add routes to India and China.

The airline will buy four Boeing 777-200 ER planes and lease a further four, replacing some existing Boeing 767 planes over the next two years, it said in a statement. The carrier will also buy two Boeing 7E7s, only the second airline to place an order for the plane, scheduled for its first delivery in 2008.

Managing Director Ralph Norris is upgrading services and cutting costs because of increased rivalry from Qantas Airways Ltd., Emirates and Singapore Airlines Ltd. The deal may help re- assert Boeing's grip on the local aviation market after Airbus SAS two years ago won an order to sell the Auckland-based national airline 15 aircraft for domestic and Australian routes.

``It's a fairly pivotal deal for Boeing -- it's one it probably couldn't afford to lose,'' said Timothy Ross, Head of Regional Transport Research at UBS in New Zealand. Air New Zealand ``is a small airline in a regional context but it might have had a bearing on other airlines' sentiments to the competitive positioning of Boeing and Airbus products.''

Chicago-based Boeing is staking its future on the 7E7, a more fuel-efficient replacement for its 757 and 767 models. The Chicago-based company expects demand for such aircraft to grow as passengers seek direct flights and airlines try to minimize layovers.

Dreamliner

Analysts expect the new 7E7 to cost $10 billion to develop. The aircraft, also called the Dreamliner, will have 200 to 300 seats and will consume 20 percent less fuel than the models it replaces, Boeing has said. By contrast, Europe's Airbus is seeking orders for its 550-seat A380, which will be the world's biggest commercial aircraft when it starts flying in 2006.

Excluding the new purchases, Boeing aircraft account for 37 of Air New Zealand's 44 jet aircraft, according to the company's Web site.

Air New Zealand said the first Boeing 777 jetliners will arrive in September 2005. By early 2007 the airline will have eight Boeing 777s, seven Boeing 747s and five Boeing 767 aircraft in its long-haul fleet. That represents a 20 percent increase in seat capacity from the 10 Boeing 767s and eight Boeing 747s in its existing fleet, Rob Fyfe, group general manager airlines, said on a conference call.

``We expect to fill those seats by flying to new destinations, increasing frequency to existing destinations and stimulating demand,'' he said.

Funding

The company will fund the additional aircraft using cash flow and bank debt, Norris said. The airline said it has a right to buy a further 42 long-haul aircraft.

Adding Boeing 777s will give Air New Zealand the capability to add countries such as China and India to its Asian network, Norris said in an interview. The aircraft ``give us the opportunity to initiate new routes'' because they have greater capability than existing Boeing 767s, he said.

The company said it would also add South American routes.

``Ultimately it will be good because it gives the airline more flexibility,'' said Reg Montgomery, who helps manage the equivalent of $110 million at BNZ Investment Management in Wellington.

The company has about NZ$1 billion of cash on hand, and some NZ$500 million of operating cash flow, Norris said. About NZ$700 million of the cost may be funded by bank debt. The airline will lease four Boeing 777s through International Lease Finance Corp., a subsidiary of American International Group Inc.

Cash, Bank Debt

``We have the ability from existing resources, cash flow and bank debt'' to pay for the upgrade, he said. ``We have no doubt we will be able to raise that debt. It is well within the servicing capabilities of the company.''

Norris said the company, which is 82 percent owned by the nation's government, will also proceed with a sale of shares to existing shareholders, flagged last year. The government has set aside NZ$150 million for its contribution.

``We have always said we wished to raise additional equity, that's still our plan,'' he said. He said the timing hasn't been decided.

Shares in Air New Zealand fell 2.4 percent to 40 New Zealand cents at 3:34 p.m. in Wellington.

Last week, Air New Zealand's debt was rated Ba2 by Moody's Investors Service, after the ratings company commenced coverage. The rating is Moody's second-highest junk rating. The airline said it no longer retains the services of Standard & Poor's.

The Moody's rating was ``very beneficial'' for the company in terms of arranging its funding, Norris said.

Bugger!!! :ok:

Chocks Away
2nd Jun 2004, 07:17
Good to see them taking it on!
Gotta get on the good foot... with Emirates very closely looking at an Auckland base to truely launch global into the USA.
:ok:

Anti Skid On
2nd Jun 2004, 10:19
So Air NZ go Airbus for Trans-Tasman and go back to Boeing for long haul - so the economies of cockpit standardisation don't appeal?

Personally I think it is good that they are going for the B777, but why not the 300 series???

BCF Breath
2nd Jun 2004, 11:37
Aside from starting another thread on the same lines......


AS-On, -300, who really cares!! New Toys! Yippee!!

Keg
2nd Jun 2004, 12:34
On behalf of a bunch of QF drivers......I'm so jealous! :( :ok: :}

dudduddud
2nd Jun 2004, 13:43
yummy-yum! I can't wait!

manamana
2nd Jun 2004, 14:22
As with all things in aviaition, believe it when you see it. VERY good news though.:ok:

Wirraway
2nd Jun 2004, 16:18
Thurs "The Australian"

Dreamliner lifts Air NZ spirits
By Steve Creedy
June 03, 2004

PREDICTIONS of a bleak future without a Qantas alliance were in the background yesterday, as Air New Zealand became the world's second carrier to order Boeing's new 7E7 "Dreamliner" in a $NZ1.35 billion ($1.2 billion) aircraft order aimed at boosting capacity and reducing costs.

Air NZ ordered two 7E7s as part of a long-haul fleet renewal, which included eight 300-plus seat Boeing 777- 200ERs and locked in a price on an additional 42 aircraft through purchase rights.

The new planes and comments yesterday by executives painted a brighter picture of the airline's future than some of the gloomy scenarios sketched during the recent defence of the proposed Qantas deal.

"These aircraft will allow us to develop new routes and increase frequency on existing routes as well as providing an overall increase in both passenger and cargo capacity," Air New Zealand chief executive Ralph Norris said.

"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 said the additional purchase rights reflected Air NZ's belief in the potential to expand its passenger and cargo business into new long-haul destinations and increase traffic from core routes.

Executives would not say which new destinations they were considering, but suggested China, India, South America and the US were among the possibilities.

The decision to buy Boeing planes came after an extensive 18-month evaluation. It will increase the number of long-haul aircraft from 18 to 20 by 2007, delivering a seat capacity increase of about 20 per cent. The Kiwi carrier becomes the first airline to order the Rolls-Royce Trent 1000 engine for the 7E7, due to enter service in 2008, with promises it will use 20 per cent less fuel than existing aircraft.

Air NZ will buy four of its eight 777s and lease four, with the first entering service in September next year.

Asked what the Boeing decision meant for synergies with Qantas, which was diversifying into Airbus A330 and A380 planes in its long-haul fleet, Mr Norris said Air NZ had to look at the routes it flew and the aircraft that best met its needs. "So, primarily, this was all about what is in the best interests of Air New Zealand," he said.

By early 2007, Air NZ expects to have a fleet of eight 777- ERS, seven 747s and five 767s delivering 6466 available seats and 291 tonnes of available capacity, up from the current 5408 seats and 268 tonnes.

Mr Norris said the 20 per cent increase in long-haul seats was consistent with the airline's capacity growth goal of 5 per cent.

"The firm commitment to aircraft that has been announced represents a minimum of aircraft that will be required by Air New Zealand, and also falls below the amount that would be required under the low growth scenario," Mr Norris said.

Air NZ planned to fund the aircraft purchases using cash flow and bank debt, and Mr Norris said it was "well within the servicing capabilities of the company".

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