Air New Zealand strikes Airbus deal
CNN Asia Business Editor
WELLINGTON, New Zealand (CNN) -- Air New Zealand is embarking on a major fleet upgrade, announcing a deal Thursday to buy or lease 15 new Airbus A320 aircraft and take options on another 20.
It said it will spend $400 million on 10 of the first 15 aircraft as part of a purchase and lease package with Airbus that includes a simulator and spares. The other five will be leased from the leasing company GECAS.
As well, it has signed up for purchase rights on a further 20 A320 aircraft, exercisable over the next 10 years.
Air New Zealand CEO Ralph Norris said the new aircraft supported a "strategic change" in the services the airline would offer to short-haul international travellers on its Tasman and South Pacific routes.
The Airbus 320s will replace a mix of Boeing 767s and 737s now used on these routes.
Air New Zealand fell into trouble last year and had to be rescued by the New Zealand government via a $366 million ($NZ885 million) recapitalization plan last October.
The government followed up in November with a decision to pump another $62 million (NZ$150 million) into the struggling carrier by June next year.
Qantas looking for stake
The airline is now held 83 percent by the government, but that could change in the near future.
Air New Zealand's Australian rival Qantas confirmed in May that it was talking to the carrier about taking a minority stake, and there is speculation Qantas could win approval to buy 25 percent after the New Zealand election is held on July 27(Full Story) .
Air New Zealand's two big shareholders before the October 2001 rescue, BIL (formerly Brierley Investment Ltd) and Singapore Airlines, have seen their stakes reduced from 30 percent and 25 percent to 5.4 percent and 4.5 percent respectively.
Qantas has made no secret of its view that Australia and New Zealand should prepare for a closer alignment of their aviation markets.
It tried to secure a cornerstone shareholding in Air New Zealand in mid-2001, but the plan did not find favor with Singapore Airlines, BIL or the New Zealand government at the time.
One reason for Air New Zealand's woes last year was the poor state of its fleet, and that of its Australian subsidiary, Ansett Airlines.
After a series of mishaps including the grounding of its Boeing 767 fleet, Ansett collapsed in September and vanished from the Australian aviation scene completely in early March when a rescue effort failed.
The Airbus deal addresses Air New Zealand's most pressing needs. Norris said the new aircraft will replace four Boeing 767-200s currently being retired, and nine Boeing 737-300s that will be progressively retired from September 2003 to December 2006.
Norris said the airline will continue to use Boeing aircraft for its internal and long-haul international services.
The first of the new A320 aircraft will enter service in October 2003, and the 15th aircraft is scheduled to be delivered towards the end of 2006.
Norris said the aircraft purchases would have a "net positive impact "on Air New Zealand's finances. Their better operating efficiency and increased seat numbers would "more than offset the cost of incremental capital employed".
There is also a switching clause in the deal, which allows the A320s to be replaced by A319s or A321s if circumstances change.
Air New Zealand shares closed in Wellington Thursday 1 cent or 1.6 percent higher at NZ$0.65.
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