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Air New Zealand Chief Sees Risk of Boeing Delivery Delays

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March 13 (Bloomberg) -- Air New Zealand Ltd., the nation’s biggest carrier, still sees a risk that its order for Boeing Co. 787 Dreamliner planes will be further delayed, Chief Executive Officer Rob Fyfe said.

The first 787 was delivered to Japan’s All Nippon Airways in September, more than three years late because of struggles with new materials and manufacturing processes. Air New Zealand is the initial customer for the 787-9, a longer version of the 787-8, and is to start receiving 10 of the planes in 2014’s second quarter.

The Auckland-based airline is postponing the retirement of some of its four-engine Boeing 747 jumbo jets to plug the gap. China Eastern Airlines Corp. in October swapped an order for 24 Dreamliners for smaller Boeing planes, in part due to the delays.

“We’ve had delivery dates, I guess the question is more what’s the level of confidence those aircraft will arrive on those dates,” Fyfe said today in an interview in London. “The delays have been frustrating” though the 787 will be a “really good aircraft” when it arrives, he said.

Boeing says the Dreamliner will be as much as 20 percent cheaper to operate than comparably sized jets, due to materials that are lighter than traditional aluminum. The twin-engine plane seats 210 to 290 passengers and is being marketed to fly long-haul routes that have been the domain of larger aircraft.

A spokeswoman for Boeing said the planemaker doesn’t discuss customer delivery dates.

Profit Decline

Air New Zealand said Feb. 23 that net income fell 61 percent to NZ$38 million ($31 million) for the six months ended Dec. 31 as fuel costs surged and a weak global economy crimped demand.

“The big difference in the past six months has been the rapid escalation in the oil,” Fyfe said. “When oil stays at an escalated level your hedges only buy you time to adjust; sooner or later you become fully exposed to that oil price.”

Brent crude has gained more than 16 percent this year in London to about $125 a barrel mainly on concern that conflict with Iran could choke off oil exports from the Persian Gulf.

Air New Zealand is raising ticket prices to reflect the increased cost of fuel and has reduced its capacity on some domestic and so-called Trans-Tasman routes between Australia and New Zealand. The carrier also plans to cut as many as 441 jobs by the end of June.

The board is now searching for Fyfe’s replacement, after announcing in January that he will leave when his contract expires at the end of the year. Fyfe, 50, who was named CEO in October 2005, said he has yet to decide what he will do next.

“There’s been a lot of speculation as to what I’ll do, but I haven’t made any commitments, in fact I’m not even entering into any conversations at the minute,” Fyfe said. “There’s far too much to do at Air New Zealand before I leave.”

To contact the reporter on this story: Steve Rothwell in London at srothwell@bloomberg.net

To contact the editor responsible for this story: Chad Thomas at cthomas16@bloomberg.net

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