Air New Zealand this morning announced it is ordering new Boeing Dreamliners to replace its 777-200s and will come with new cabins and provide scope for the airline to fly from Auckland to New York.
The airline this morning said it will buy eight 787-10 planes and will switch from Rolls-Royce engines to General Electric to power them. They will cost $US2.7 billion ($4.1b) at list prices but the airline will get a significant discount on this.
The planes are 40 seats bigger than 787-9 Dreamliners that have been in the airline's fleet since 2014.
Chief executive Christopher Luxon said it was an ''incredibly exciting day'' for the airline.
He said it marked a new chapter and had rights to take up to 12 more Dreamliners if there is sufficient demand for air travel. Some of which could be 787-9 planes.
The 787-9 version of the plane is capable of flying non-stop between Auckland and New York, a distance of 14,200km, depending on how many passengers they have on board. A higher premium mix - with fewer passengers - would allow the planes to fly further.
While Luxon wouldn't put a date on New York services it is understood planning for it is well advanced and could be launched within a year - with existing 787-9s that have been reconfigured - following successful Auckland-Chicago flights which began last November.
Sao Paulo in Brazil and Toronto in Canada are also on the radar.
New GE Aviation's GEnx-1B engines will power the eight new planes which would enter the fleet from 2022.
Luxon said the airline had a mix of leased and aircraft owned outright and the decision on this would be done closer to the delivery date.
Airlines can get up to 50 per cent discounts on list prices, but the parties have agreed not to disclose the actual purchase price.
The 787-10s will have ''reinvented'' interiors. The airline is doing work in a test facility to transform its business and economy sections and is close to finalising how they will look and signing deals with suppliers.
Luxon said the 787-10 has almost 15 per cent more space for customers and cargo than the 787-9.
The planes are just over 5m longer and have larger canterlevered landing gear for greater take-off weight.
"However, the game changer for us has been that by working closely with Boeing, we've ensured the 787-10 will meet our network needs, including the ability to fly missions similar to our current 777-200 fleet.''
Those planes have over the years flown to Vancouver, Houston and Buenos Aires.
"This is a hugely important decision for our airline. This investment creates the platform for our future strategic direction and opens up new opportunities to grow," said Luxon.
The agreement included options to increase the number of aircraft from eight to up to 20. and the airline had also negotiated substitution rights that allow a switch from the larger 787-10 aircraft to smaller 787-9s, or a combination of the two models for future fleet and network flexibility.
The delivery schedule can also be delayed or accelerated according to market demand, which Luxon said was largely driven by inbound tourism.
Expanding in North America taps into high value markets that had grown strongly in the past three years.
Combined with GE's engines, they are expected to be 25 percent more fuel efficient than the aircraft they're replacing.
Christy Reese, vice president of Boeing commercial sales and marketing for Asia Pacific said the Air New Zealand decision was a ''bold'' one.
Selling more Dreamliners will be a fillip for Boeing, under intense scrutiny after new equipment on its smaller, new 737 Max planes has been linked to two fatal crashes. Following the crashes it has been widely condemned for its handling of the introduction of new systems, although they are different to those on Dreamliners.
Luxon stressed Dreamliners were completely different aircraft with different systems and the airline had no problem going with Boeing, where it had bought planes for 50 years.
''It (Max issues) didnt figure at all. The 787 family of aircraft have none of the challenges around the Max system.''
Luxon said other aircraft had been strong contenders.
Following a two-year process, the airline had narrowed down its options to a new iteration of the Dreamliner and the Airbus A350, of which more than 500 are in service.
The larger Boeing 777X, which is still in development, had been considered but was not in the running this time, more likely an option further down the track for the airline's younger and larger 777-300s.
Boeing had presented new options for the 787 which, aside from the Rolls-Royce engine issues, has been a highly successful plane for the airline for the past five years. It has 13 in its fleet and another one to come as part of the original deal, first signed in 2004.
Dreamliners first flew for an airline in 2011 and entered the Air New Zealand fleet three years later. The development and early build programme was plagued by delays and problems and soon after it started flying commercially it had problems with battery fires. But since a fix was found for the batteries the plane has provided reliable service for airlines. More than 830 of a total 1400 on order are in service.
Qantas started flying Dreamliner 787-9s from Perth to London last year - at around 14,500km the longest route so far for the aircraft type. In the first year of operation, it reported 99.5 per cent reliability with only four flights cancelled, all because of technical issues.
Air New Zealand was early to commit to the Dreamliner, at the beginning of this century signing the deal in 2004 when it was still known as the 7E7.