KEY POINTS:
Air New Zealand's purchase of eight 787 Dreamliners - the Boeing plane being unveiled to the public today - will enable the airline to dramatically increase the destinations it flies to.
Air NZ will pay about US$1.2 billion ($1.5 billion) for eight 787s, the first of which will
go into service in late 2010.
The new planes mean between 20 and 25 new routes were now being seriously considered, said group general manager international, Ed Sims, in Seattle yesterday.
Air NZ currently flies direct to just 10 long-haul destinations.
"If you put a blindfold on and tried to design the perfect aircraft for Air New Zealand, you couldn't come up with anything better than the 787," he said.
Because it is smaller - with fewer than 300 seats - but has a similar range to the 747, the new planes will allow the airline to fly deeper into Asia and America. Flights to South Africa and South America are also being considered.
The airline was committed to growth of between 6 and 8 per cent a year, Sims said.
That will see it add about two routes a year for the foreseeable future, although it's possible that rate may increase around 2011 and 2012 when the bulk of the 787s come into service.
The airline expects the new planes will enable it to increase its yields from each flight. That is in part because the smaller size means fuller long haul journeys, but the 787s will also have more premium seats.
The move to increase the number of business class and premium economy seats had been a success and the strategy would be pushed further with the 787, Sims said.
In the past two years, the airline has moved from about 15 per cent premium seating to 20 per cent.
With the 787s that ratio was more likely to be about 30 per cent premium seats.
The price tag for the planes represented a very good deal for the airline and was achieved because Air NZ was one of the first to commit to buying the 787s in 2004. Boeing currently has list prices of up to US$200 million on the planes and customers ordering now can't get delivery until 2014.
The decision to invest early was considered risky at the time but had proved the right one, said Air New Zealand chairman John Palmer.
Globally, demand for air travel has continued to grow at about 6 per cent a year while the wait for the 787s and delays to the launch of the Airbus A380 have generated a capacity shortage.
That has seen airline stocks rise around the world. But analysts say Air New Zealand is better positioned than competitors to take advantage of the positive trend because its major capital spending was done early.
"With hindsight it might look like we were lucky," Palmer said. "But a lot of strategic planning went into the decision. It was no accident."
Air New Zealand is taking the second generation 787-9 plane - which means Qantas will beat it to get 787s into service.
Qantas is buying 85 787s and will have 15 of the first generation 787-8 planes in service from July next year.
Chief executive Geoff Dixon announced yesterday that those planes would be deployed to its low-cost Jetstar brand.
Air New Zealand had decided to wait for 787-9s because they could fit about 40 more seats and fly slightly further with no extra operating cost, Sims said.
The 2011 introduction also fitted best with the airline's existing growth plans.
It will likely be full year 2011 before the financial benefit of the 787s flows through to Air New Zealand's bottom-line.
Air New Zealand was in the process of putting together forecasts at the moment, Sims said.
While it is expected to increase profitability, he was not prepared to reveal forecasts.
Air NZ shares closed at $2.54 on Friday.
* Liam Dann travelled to Seattle courtesy of Air New Zealand.
Plane sailing
* Air NZ will buy eight second generation 787 Dreamliners.
* The total cost is likely to be about US$1.2 billion
* It takes delivery of the first plane in 2010
* The lower capacity combined with long range will make more routes economically viable
