Flying into the future - Air NZ's Dreamliner story

Air New Zealand's 787-9 Dreamliner at the Boeing factory, Seattle, Washington, United States. Photo / Brett Phibbs

It’s been a long time coming, but Air New Zealand’s first 787 Dreamliner touches down next week. Grant Bradley reports on the airline’s high hopes for its revolutionary new plane.

If it hadn't been for 9/11, the Dreamliner may not have got off the ground.

The delta wing Sonic Cruiser was at the heart of Boeing's thinking at the time of the attacks on the United States. Although the jet would have flown at just below the speed of sound, getting passengers to their destinations 20 per cent faster, it would have also guzzled fuel at a correspondingly increased rate. The plane was being developed just when oil prices were soaring, airlines were in turmoil and order books were empty.

By 2003 Boeing had ceded supremacy to European rival Airbus, its share price was tanking and it needed a new project to wrest back the initiative. Hence the Dreamliner, a more technologically advanced passenger aircraft than any other. Half the fuselage would be built with new composite plastics instead of traditional aluminium, and most importantly, airlines could cut their fuel use by 20 per cent.

At the same time, Air New Zealand was fighting hard to revive its fortunes following its near collapse in 2001. Having jettisoned Ansett, the airline was reshaping itself and rebuilding its bank balance. After a close-run battle between the two big planemakers, the airline opted for the new plane that almost perfectly suited its long-haul routes.

When it ordered Dreamliners in June 2004, the plane was still in the very early stage of development and didn't even have a family name. Back then it was known as the 7E7 ("e" for efficiency), until Boeing settled on the 787 designation later that year.

Boeing was desperate to sell the revolutionary plane and was offering good deals to any airline prepared to take a punt. Air New Zealand ended up being the second airline to sign up for the 787-8, hoping to take delivery four years later. In what turned out to be a prudent move, it also built a clause into the contract that would allow it to change to a later model of the plane.

Watch: Boeing 787 - aircraft testing

That's what happened in 2006 when Air NZ opted to become the launch customer for the larger and longer range 787-9 - target delivery date 2010.

Newly developed planes invariably arrive late, but the holdups that plagued the Dreamliner became legend within aviation, as outsourced sections of the plane didn't fit together, supply chains broke down and industrial disputes halted work at Boeing's Seattle manufacturing base.

Because of the delays, Air NZ has had to revise its fleet strategy and plug gaps with other planes. But unlike other carriers, which slated Boeing and demanded compensation, the airline kept its frustration publicly muted.

And years after initially hoped, the first of the airline's 10 Dreamliners is now about to arrive.

Christopher Luxon is Air NZ's third chief since it signed up for the plane, and says it's been a case of getting on with the job instead of dwelling on the delays. "It's amazing how it gets behind you very quickly as you work to get these aircraft into service."

As Air NZ prepares to bring a group of more than 50 airline staff, officials and media back from Seattle aboard ZK-NZE on next week's delivery flight, Luxon is excited.

"In many ways it is as revolutionary as the 747 was back in the late 1960s and early 70s - this is the future of flight." While Air India has complained its 787-8s are not delivering the promised fuel savings, Luxon says airline executives he has spoken to are satisfied with the plane.

He says the aircraft, with its fuel and maintenance savings, is a game changer for airlines, and for passengers too.

Larger windows and slick mood lighting are immediately apparent, but it's what passengers can't see that will make them feel better about flying Air NZ's longhaul routes, consistently among the lengthiest of any carrier.

Carbon fibre used in parts of the the wings and most of the fuselage replaces 1500 sheets of aluminium and saves 50,000 metal fasteners, so the plane is lighter, stronger and more durable.

The extra fuselage strength and its resistance to corrosion allows the planes to have the big windows and higher humidity - more pleasant in the cabin, where dehydration contributes to jetlag.

The plane's four main generators can produce a massive 1.5MW of electricity - enough to power more than 1000 homes.

Alan R. Mulally, chief executive of Boeing's commercial airplanes division, shows a model of the Sonic Cruiser at the Paris Air Show. Photo / AP

Electrical system

Using electricity instead of pneumatics to power systems such as hydraulics, engine start and wing ice protection means the plane has 32km less wiring than a 767, another big contributor to saving weight.

The electrical system extracts as much as 35 per cent less power from the engines than the pneumatic systems on older planes.

But it was the lithium-ion batteries that start the electrical systems which delivered the sting in the tail to Boeing's woes, more than a year after it delivered a plane to its first customer. Burning batteries resulted in all Dreamliners being grounded for two months before the problem was resolved to the authorities' satisfaction.

While the 787-9 appears to be just a bigger version of the the earlier model, there are other advances, including modifications to the tail which promise to deliver even better fuel efficiency.

Boeing is keeping details under wraps, but both the vertical and horizontal stabilisers have new technology that smooths out airflow and reduces drag, by drawing air into the leading edges of the three fins and blowing it out the back.

Boeing says engineers worked on the "hybrid laminar flow control" technology for decades, but until now the weight of the systems has outweighed fuel savings.
For Air NZ, the Dreamliner is the headline act in a broader fleet strategy which will result in ageing 747 jumbo jets and 767s being retired.

Watch: Inside Air NZ's Boeing 787 Dreamliner

"This investment is enabling us to get our aircraft age down and get a consistent fleet of 25 widebody aircraft that will all look and feel the same," Luxon says.

The cabins of the 787s will mirror those of Air NZ's 777-300s, used to fly to North America, with four seating types: economy, sky couches, premium economy and business premier.

For Luxon, consistency is the key, not only inside the planes but also among the airline's people.

A group-wide training programme, "Project Enhance," is under way for its 11,000 staff.

"It is real virtuous circle," he says. "By getting the commercial engine working right we can enhance the customer experience." The company's commercial performance is humming. It is on track to next month announce its best full-year profit in a decade, with forecasts that it will top $300 million, up 17 per cent on last year.

That profit projection represents a 15 per cent return on equity, identified by the CAPA Centre for Aviation as one of the best in the industry. The airline is also one of only four in the world with an investment grade credit rating.

"Air New Zealand enters FY2015 - and it's the year of its 75th anniversary - in one of the best positions for any airline," says Rob Mercer, head of private wealth research at Forsyth Barr, who has closely followed the airline during the Dreamliner saga.

The list price of a 787-9 is US$249 million, but how much an airline pays can vary markedly from this, though those figures are tightly guarded.

"It's not just the plane, it's the price you're paying for the plane - ultimately it's the return on the investment," says Mercer. He says the airline would have got significant discounts for its Dreamliners as the launch customer for the 9-series and would have received some form of compensation for the delays.

"Who knows how that has been structured but they're putting on this equipment that is significantly better than their competitors will be able to."

Watch: Timelapse: Air NZ makeover

'Never been in better shape'

Just on 20 per cent of Air NZ was sold by the Government last year, raising $365 million for the sale of 21 million shares at $1.65. The share price has continued its strong run of the past two years, rising from 88c in July 2012 to a recent high of $2.27.

"With the share price performance, I'm not sure where it goes from here. It's not trading at a discount but operationally it's never been in better shape," says Mercer.

Luxon's predecessor Rob Fyfe was the airline's group general manager when it signed up for the Dreamliner, and headed negotiations with Boeing and Airbus for the next generation of longhaul planes.

Before settling on the Dreamliner, the airline came close to signing for the Airbus A340.

"In a pure performance sense the A340 was a slightly less capable aircraft but it was cheaper to buy," Fyfe says. Economically they were comparable aircraft.

"As we were going through the negotiation it became very clear that if we could make at the time what would have been the very first order for the 787, that would give us a lot of negotiating power with Boeing on the 787 and 777 as a package."

"They were desperate to get some sales momentum with this new programme and it fundamentally changed the whole level of discount that we were able to access across the whole package of aircraft." But the delays meant the airline was forced to hold on to older aircraft, and being forced to renew leases was costly.

"When you're going to a lessor who knows your 787s are delayed you don't have a lot of negotiating power when you start wanting to extend the lease for a few more years. Boeing agreed to compensation but it was still frustrating that we weren't able to deliver the quality that we'd want to," says Fyfe.

Air New Zealand sought clarity from Boeing and was kept in the loop.

"Ultimately we never lost confidence that the 787 was almost the perfect aircraft for Air New Zealand with long routes and relatively small traffic numbers. I think it will prove for Christopher and the team a real economic game changer."

Air New Zealand Dreamliner programme director Kerry Reeves with inflight service manager Priyanka Girish inside a mock-up cabin of the new Boeing 787 Dreamliner. Photo / Dean Purcell

The customer walk
As the plane is being built, there are various points during assembly when the customer is invited in to inspect certain zones as they are completed. If there are any problems, they are rectified. When the aircraft is tendered for delivery - usually one to three weeks before the airline flies it away - it pores over the plane, concentrating on the interior.

During the past weeks eight Air NZ staff have been looking over the Dreamliner. Reeves says they typically pick up hundreds of imperfections - from scuff marks, to seats damaged during installation, to wrongly set recline functions. These are marked with tape and logged for repair.

Putting the plane through its paces
The "Customer 1" or C1 flight under is under Boeing's control, but an Air NZ pilot flies the plane in a rigorous test to ensure it performs up to specifications. The standard test flight takes two to three hours.

After taking off from Paine Field, Everett, and doing systems checks, the plane heads for Moses Lake in Washington State's interior. The pilots make "touch and go" landings or full stop landings at Grant County Airport, a former Cold War base where Titan nuclear missiles and strategic aircraft were once based. Reeves says the flight is "full-on."

Engines will be cut in mid-air and relit, the cabin depressurised to test whether oxygen masks are properly deployed, and the plane slowed to near-stall speed to ensure the stick shaker works.

The aircraft is flown to a cruise altitude of 35,000-36,000 feet and as many as half a dozen Air NZ staff check to make sure everything works at altitude: inflight entertainment, lighting, interior doors open and shut and laminates retain their integrity.

The sit down
This is when the airline customer negotiating team and Boeing hammer out any outstanding issues, or "commitment items", that require compensation. Reeves says it can be a fairly hardball session. As an example, there there may be a problem with a seat that won't stop the airline flying the plane away, but will need repairs in New Zealand. "What you could negotiate is compensation for fixing the issue. We'll negotiate the labour costs."

He says there are invariably issues, but they are usually minor.

Air New Zealand's business class seats in the new 787 Dreamliner. Photo / Brett Phibbs

Making payment
Airline reps and Boeing sit down in one of the four contract signing rooms in Boeing's delivery centre and put pen to paper. Once the airline and Boeing agree on any commitment items, the money (which will later turn up in NZ trade data) is banked and proof of payment is given. If it's the airline is buying an aircraft outright, this is done directly; if it's an operating lease (about 25 per cent of Air NZ's wide-body fleet) the payment is wired to the lease company then the lease document is signed.

Air New Zealand is then given a key to the cockpit - though today's sophisticated flight deck security means it is purely ceremonial. The Dreamliner delivery flight will have scores of people on board, including VIPS, so it will be amply catered. Reeves says for a standard delivery flight with a handful of staff, Boeing will put on some basic food, and for those who are no longer on duty, maybe a box of local beer.

Grant Bradley is the Herald aviation writer.