The A320neo aircraft will replace Air New Zealand's current fleet of 13 A320s which operate the majority of the airline's short-haul international services.
Equipped with new generation engines and fuel efficient swept up sharklet wing tips they are expected to deliver fuel savings of up to 15 per cent on the airline's existing A320s which first joined the fleet in 2003.
Air New Zealand chief executive Christopher Luxon signed the agreement with Airbus chief operating officer, customers, John Leahy at the International Air Transport Association's annual general meeting in Doha, Qatar, early today.
While the list price totals around $1.6 billion, the airline has received undisclosed discounts for the order.
Shareholder approval is not required as the value of the transaction is below the "relevant thresholds", the airline said.
Air New Zealand has two separate fleets of A320s, one with a 168-seat international configuration and one in domestic with 171 seats.
The domestic A320s are being phased in to replace ageing Boeing 737s.
The airline said A321neos have 38 more seats than the A320s which fly to Australia and the Pacific Islands.
The first A321neo is due in late 2017 with the remainder of the aircraft delivered at intervals through until 2019.
The additional A320 for the domestic fleet will be delivered early next year.
Luxon said the purchase was part of the aim of simplifying its fleet, a key part of its "Go Beyond" strategy of high growth.
"Operating one narrow body aircraft type will bring important efficiencies in training, maintenance and operating costs," he said.
Airbus said the A320neo family of aircraft is the world's best-selling single aisle aircraft.
The company already has some 2700 orders for A320neo models from 50 customers around the globe.
Big order
• Airbus A320neos are the latest generation of the popular single aisle jet
• Air NZ will buy 13 of the planes
• The stretched version can hold up to 220 passengers
