Flasher fleet cleared for take-off

By CHRIS DANIELS

Air NZ has been given shareholder clearance to proceed with its $1.8 billion fleet upgrade, a move it says will allow it to open up new business in the potentially lucrative Chinese market.

The size of the deal, where Air NZ will buy and lease eight Boeing 777-200ER planes and two Boeing 7E7-8 planes, triggered clauses in the Companies Act and stock exchange listing rules that required shareholder approval.

Fewer than 100 people attended a special shareholders meeting in Auckland yesterday, the result of which was a foregone conclusion, given the Government's 82 per cent shareholding.

Chairman John Palmer said investing in the new planes allowed the airline to regain its competitive position in the international markets "where our product has fallen well behind the offerings of other major airlines we compete with".

He said doing nothing would erode shareholder value and hand more opportunities to competitors.

Chief executive Ralph Norris said there was a large gap in the airline's fleet, which needed a plane with up to 300 seats.

Having the right aircraft would open up opportunities in new markets such as China.

While it could fly 747-400s to China, the market was yet to mature, which meant the planes would be too big for the demand "resulting in significant losses".

A plane like the new 777 was much better suited for entry into new markets, where the demand for travel to New Zealand was growing.

Tim Hazledine, an economics professor at Auckland University and an Air NZ shareholder, questioned the board on statements made by the airline's lawyer, Jim Farmer, QC, in the High Court.

He said Farmer had claimed the airline needed an alliance with Qantas if it was to earn the profit that it needed to reinvest in the business.

Norris replied the fleet purchase was well within the existing capabilities of the airline.

The alliance could have more of an impact later in the decade, when Air NZ would need to start replace its fleet of Boeing 747-400s - an expensive project.

Getting airborne

* Air New Zealand has signed a deal for eight new Boeing 777-200 ER (extended range) planes and two new Boeing 7E7-8 planes at a cost of $1.8 billion.

* They are needed to replace its fleet of ageing Boeing 767-300 planes.

* It has also secured "purchase rights" for another 46 planes (30 777s and 16 7E7s). These rights lock in a good price, but do not carry any legal obligation to actually buy the planes. These expire in 2018 and cannot be transferred to any other airline.

* Air NZ is buying four of the 777s and leasing the other four. It will own the 7E7s, which are still being developed by Boeing and have yet to fly. The first new 777s are due to arrive between October next year and September 2006.