KEY POINTS:
Air New Zealand sounded the death knell for its 747 fleet yesterday, announcing that it will buy four of Boeing's latest model 777-300 long range aircraft.
The new 777-300ER aircraft will allow Air New Zealand to phase out its 747s by 2013.
The four planes have a combined
list price of $1.4 billion. But Air New Zealand has been given a substantial discount - in excess of 30 per cent according to some analysts - because it bought the rights to buy the planes back in 2004 when the industry was at a cyclical low.
Including the eight Boeing 787-9 planes Air New Zealand had already ordered, the amount invested in the fleet upgrade was now more than $2.6 billion, said Air NZ chief executive Rob Fyfe.
The 777s will be delivered around the same time as the 787s - in late 2010 and 2011.
The airline will also be able to take advantage of the high currency and take hedges to lock in US dollars now for the payments to Boeing, which will be made closer to delivery.
"The dollar wasn't the driver for the deal but it will provide a significant upside," Fyfe said.
It was trading at closer to US65c when the original business plan for the purchase was done, he said. The purchase would be financed with a mix of debt and some of the "healthy cash balance" the airline was currently sitting on, Fyfe said.
The move takes Air New Zealand's strategy of flying smaller more fuel efficient planes on long haul routes to its logical conclusion.
The 777s are 16 per cent more fuel efficient than a 747 and use just two engines. They carry slightly fewer passengers - with a capacity of 365 seats compared to 386 on the current Air NZ configuration of the 747 - but offer a similar range.
The planes would enable Air New Zealand to fly direct to cities in the centre of the US or as far as Beijing, said Fyfe. The 747s had been the mainstay of the group for almost 18 years. "But the Boeing 787-9 and 777 aircraft are much better suited to our long-term growth strategy of serving new markets point-to-point."
There were also significant environmental benefits through reduced carbon emissions, he said.
When Air NZ had all its new planes it would have one of the most modern fuel efficient fleets.
"Air New Zealand will have one of youngest, most technologically advanced, most fuel efficient and most environmentally friendly long haul fleets in the world," Fyfe said.
Air New Zealand now has a long haul fleet of eight 777-200ERs, eight 747-400s and five 767-300ERs.
The 767s will also be phased out after the arrival of the 777-300ERs.
The arrival of the new planes would allow Air New Zealand to undertake another upgrade of the interiors in its fleet, Fyfe said.
The focus would be on improvements to economy class.
777-300ER
* A bigger, longer-range model of the Boeing 777 series.
* It seats 365 people and has a similar range to the 747 but is 16 per cent more fuel efficient.
* The four planes have a combined list price of $1.4 billion although Air NZ got a big discount.
* The planes will be delivered in 2010 and 2011.
