Plane talking for Air New Zealand

By CHRIS DANIELS

For the past 18 months, Air New Zealand staffers have been kicking some big tyres as they look for a new plane to add to their fleet.

Replacements are needed over the next few years for the airlines' nine ageing Boeing 767-300s, and rival plane makers Boeing and Airbus are locked in a battle to win the order.

Boeing is singing the praises of its twin-engined 777 family to Air NZ, and Airbus is trying to sell its A340, four-engined planes.

Prices of the aircraft are roughly comparable - from around US$175 million to US$200 million ($267 million to $305 million) each.

It is a tough decision for Air New Zealand managers, one that will have an effect on the whole airline.

The type of plane chosen dictates the type of routes that can be flown, which can open up a whole range of new business opportunities.

An announcement on which plane has won the beauty parade may still be a few months away, but a recent whirlwind visit to Boeing's factory in Everett, Washington, organised by the company for New Zealand journalists, could be a clue that the 777 may be pulling ahead.

Air NZ needs a plane to replace its nine 767-300 aircraft - average age 8 years - which fly to Hawaii and then on to the US, and to Japan, Hong Kong and Singapore.

As these planes get older, maintenance costs increase, and it becomes more sensible to replace them with more efficient, newer planes.

Airbus had a big win last year, breaking into Air NZ's Boeing-only fortress with an order for 15 new single-aisle A320 planes.

Airbus is now hoping its favourable reception by Air NZ and the success of the A320s will help it win the deal to supply even bigger planes.

One of its selling points is the "cockpit commonality" of its fleet, allowing pilots to easily move between the different aircraft.

This means a pilot can step out of a big, four-engined A340 and go straight into the cockpit of a smaller A320.

Air NZ may, however, choose to use Airbus for its smaller planes and remain a Boeing airline for the bigger aircraft.

Air NZ says that any new plane it buys has to be the right size for the markets it is intended to service.

"The aircraft must allow us to simplify the overall fleet structure," said a company spokesman.

"The aircraft must be extremely efficient and have a minimum cost of maintenance."


Air NZ's evaluation programme for replacement of the 767s began in January last year and a decision on what the new aircraft will be is due within the next three months.

Whether Airbus or Boeing wins, it could be a year to 18 months before the first of the new planes arrives.

"New generation aircraft have more capability to meet network and product needs at lower operating costs than existing aircraft," says the company.

At the heart of the Boeing-Airbus rivalry are two different visions of the future of air travel.

The Europeans are betting on big - they are building the world's biggest commercial jetliner, the double-decked, 555-seat A380, due to make its first test flight next year.

Boeing is backing small, developing cheaper, more efficient long-range planes that will carry 200 to 300 people.

It says the aviation industry's market fragmentation will continue, that people want to fly direct to their destination rather than having to go through congested hubs such as Los Angeles, Singapore and Heathrow.

Airbus agrees that "point to point" travel is growing, but says "hub to hub" will also expand as the big hub cities continue to grow.

Instead of flight after flight of 747s leaving major airports such as Hong Kong, Singapore and Heathrow, it says, fewer flights using bigger planes will be needed.

In a recent interview with Boeing's inhouse Frontiers magazine, the company's vice-president of business strategies and marketing for commercial airplanes, Nicole Piasecki, said passengers preferred the convenience of frequent departures and did not want to travel on circuitous routes through one or two connecting hubs.

"More frequencies and point-to-point services - these two market conditions are what we call 'fragmentation' and data shows passengers prefer it," he said.

Piasecki says the market is demanding more new and more frequent non-stop flights.

This means smaller planes, not increased aeroplane capacity or double-decker passenger compartments.

Another Boeing executive, marketing vice-president Randy Baseler, said smaller planes, such as its 777 family, coupled with industry deregulation, had changed the aviation market.

"Today smaller airplanes can fly longer-range markets," he said.

"This has opened new markets in a region traditionally dominated by the 747."

Despite increases in the number of people flying, the average plane size in the North Pacific had dropped since 1998.

"Boeing is betting on its smaller, super-efficient 7E7, while Airbus bets on its mega-transport and a future premised on funneling long-haul fliers through major air hubs," said Baseler.

Airbus says its bet has already paid off, citing the 129 orders it has received for the 'mega-transport' A380.

Orders for Boeing's flagship 747, have dried up almost completely. Only two new planes were delivered this year, and most new 747-400 orders are for freighters.

Boeing says it accepts there is demand for new, extra-large planes, but there aren't enough customers to make a decent return on the billions needed to develop them.

Air New Zealand, which flies some of the longest routes in the world, will be a prime candidate to realise Boeing's vision of a fragmented, point-to-point aviation market.

It is not big enough or rich enough to buy a fleet of huge A380 aircraft.

This high-volume, hub-to-hub flying will increasingly be done by the world's biggest airlines, such as BA, Qantas, Singapore and Emirates, which has ordered 43 new A380s.

Air NZ chief executive Ralph Norris sees the airline's future as one of a number of "regional independents", occupying the next tier down from the "mega carriers".

Two contrasting visions of how the skies will look over the next 10 years from two bitter commercial rivals. If either gets it badly wrong, it could end up with too few orders to produce the billions of dollars needed to develop and build new aircraft.

As Air New Zealand's managers weigh up whether to buy Airbus or Boeing, they can at least be thankful there are still two companies making these planes.

If one disappeared, the already stratospheric price tag would read more like the sticker on the windshield of a space shuttle.

The planes

Boeing 777 family

* Two engines

* From 305 to 365 passengers

* Cabin width: 5.87 metres

* Maximum range: From 5200-9280 nautical miles (9630-17,186 kms)

Airbus A340 family

* Four engines

* From 239 to 380 passengers

* Cabin width: 5.64 metres

* Maximum range: 7300-8650 nautical miles (13,500-16,000 kms)