Air NZ in Boeing's cockpit

By CHRIS DANIELS

Writers of cliches have endless scope when dealing with airlines - "air fare dogfights", "turbulence ahead", "clear skies ahead".

A suitable, though long-winded, one to describe Air New Zealand's new fleet announcement could be "Air NZ climbs well and truly into Boeing's cockpit".

Its decision to acquire eight new Boeing 777-200ER planes and two 7E7 aircraft, with options to buy 42 others, means it has accepted the Boeing theory of market fragmentation in commercial aviation.

Boeing sees an aviation world with fewer big planes lumbering between increasingly congested hub airports such as Los Angeles and Heathrow.

But it thinks airlines and travellers will want more "point-to-point" travel, flying in small, efficient long-range planes between smaller cities.

Air New Zealand sees the world changing towards one dominated by a small number of truly international carriers, with a second tier of regional airlines feeding into them.

It is these big carriers - such as Singapore Airlines, Qantas and British Airways - that are buying the new Airbus A380, a 550-seat double-deck jumbo.

They will haul millions of passengers a year between the big hubs, and Air NZ will take them from the hubs to New Zealand in its smaller aircraft, or bring them straight from their homes, be they in Denver, Seattle, Shanghai, Yokohama or Bangkok.

Having more small aircraft will enable Air New Zealand to offer more flights and a wider range of destinations.

It says one of the new 777s will soon be flying the Auckland to San Francisco route, a good example of the fragmented market where secondary destinations become more popular.

For too long, the airline has complained that most of its capital is tied up in the least productive part of its business, the long-haul routes. Choosing the new 777s and accompanying options gives it the flexibility to upgrade to bigger planes should demand take off, or stay with smaller 300-seat aircraft.

And while Air New Zealand may seem a small fish in the big pond of world airlines, yesterday's order will set the champagne corks flying in Chicago and Seattle, Boeing's corporate and commercial aircraft headquarters.

Once the world's leading commercial aircraft-maker, Boeing has been battered in recent years by its European rival, Airbus.

Last year, Airbus overtook Boeing in the number of planes constructed and sold.

Air New Zealand has a good reputation as a long-haul carrier, and Boeing would have been hoping that such an airline would be one of the first to order its revolutionary 7E7.

Boeing can now use Air NZ's choice as a marketing tool.

The financial impact on Air New Zealand is considerable, although chief executive Ralph Norris says the money needed for the new planes will be found internally.

He said that with existing resources and forecast cashflows, coupled with bank debt and calling on the Government and other shareholders in a rights issue, all would be well.

New planes - despite the billion-dollar pricetag - mean cost savings for an airline.

New engines use less fuel and are more efficient.

All new aircraft are built with lower per-seat operating costs as a main selling point.

Yesterday's order, which was bigger than many were expecting, is a sign of great confidence from Air New Zealand and indicates an organisation flying far away from the near-disaster of just a few years ago.

If it can finance such a big deal without a huge Government handout, as it claims, it is in better shape than many of the world's airlines.