Air NZ 'clinched half-price Airbus deal'

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Air New Zealand is likely to have secured a 50 per cent discount on the US$1.08 billion (NZ$1.5b) list price for its new domestic fleet of 14 Airbus A320 aircraft this week, says Macquarie Equities.

On the basis of a US$540 million deal to be paid for over five years between 2010 and 2016, Macquarie expects Air NZ's management will make use of operating leases wherever possible, minimising risk and cash outflows.

"We anticipate the aircraft order will be split between operating and finance leases, depending on conditions at the time, which should smooth out the capital expenditure profile between 2010 and 2016," said Macquarie analysts Russell Shaw and Warren Doak.

A finance lease raises finance to pay for assets, whereas an operating lease would involve Air New Zealand selling aircraft to aircraft operating companies and leasing them back. The latter avoids the airline bearing the cost of the aircraft when they are ageing and at a time it would be looking to replace them with new generation narrow- body aircraft.

The analysts have assumed Air NZ will pay up to 35 per cent of the purchase price in deposits, receiving cash proceeds on delivery. The aircraft are then sold and leased back to the aircraft companies.

John Leahy, Airbus chief operating officer (customers), was more circumspect about the price paid by Air NZ for its planes.

After signing off on the deal with Air NZ yesterday, he said in Sydney that South Pacific carriers needed more than 630 aircraft worth US$87b between this year and 2028.