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Mon 27 May 2019 11:06 AM

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Air New Zealand to buy Boeing 787-10 jets worth $2.7bn

The Auckland-based airline also has an option to buy as many as 12 additional 787-10 aircraft

Air New Zealand to buy Boeing 787-10 jets worth $2.7bn
Air New Zealand currently operates a fleet of 787-9 aircraft, some of which were grounded last year after a global issue with Rolls Royce engines.

Air New Zealand agreed to buy eight Boeing Co. 787-10 aircraft, worth $2.7 billion at list prices, to replace and upgrade its long-haul fleet.

The Auckland-based airline also has an option to buy as many as 12 additional 787-10 aircraft, according to a statement released Monday. The company said it has negotiated a “significant discount” to the sticker price of the Dreamliners, which will be powered by GE Aviation’s GEnx-1B engines.

Air New Zealand has been in negotiations to replace a fleet of Boeing 777-200s with newer, more fuel-efficient jetliners capable of flights of more than 12 hours that connect the South Pacific nation with Asia and the Americas. Even as rising fuel costs squeeze profit margins, the airline wants to expand its network further around the Pacific Rim and toward the east coast of the U.S.

“We’d like to fly direct from Auckland to New York,” Chief Executive Officer Christopher Luxon said in an interview. “We’d like to try and deliver that in the next few years.”

The airline needs to strike the ideal balance of fuel, cargo and passengers as well as a seating configuration that will attract high-value customers to the route, he said. The entire long-haul fleet will undergo a “re-invention” of the cabin layout and interior experience once the 787-10 arrives, he said.

A decision also has to made on whether the 787-10 or the smaller 787-9 is best suited to the New York route.

Air New Zealand currently operates a fleet of 787-9 aircraft, some of which were grounded last year after a global issue with Rolls Royce engines. The airline also runs seven Boeing 777-300s that will need replacement starting in the middle of the 2020s.

Boeing’s recent issues with the Max 737 aircraft “didn’t really figure in our conversation” about the 777-200 replacements, Luxon said.

Boeing “is a high calibre, high quality organization, so we had no issues in general,” he said. “On the specifics, the systems and software that’s involved with the Max 737 aircraft is a completely different proposition.”

The 787-10 combined with the GE engine is expected to be 25% more fuel efficient than the aircraft they will replace, the airline said. The first plane will join the fleet in 2022, with the remainder delivered at intervals through to 2027.

Air New Zealand shares were unchanged at NZ$2.72 in Auckland. The stock has declined more than 12% this year.

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