BOEING BIDS TO SELL AIR NEW ZEALAND FIFTEEN NEW AIRCRAFT

UNCLAS SECTION 01 OF 02 WELLINGTON 000037

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TAGS: BEXP EAIR EIND EINT EINV ENRG ETRD NZ
SUBJECT: BOEING BIDS TO SELL AIR NEW ZEALAND FIFTEEN NEW AIRCRAFT

Ref: Wellington 02

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1. (U) Summary: Boeing Corporation hopes to secure a new tender
for the sale of fifteen new 737s to Air New Zealand worth US$1.2
billion. If successful this will add to Boeing's already lucrative
contract to supply the national carrier with state-of-the-art
aircraft. Air New Zealand is awaiting delivery of eight 787
Dreamliners worth US$1.5 billion and four 777-300ERs worth an
additional $US1 billion. To date, Boeing has been able to win out
against rival Airbus in the New Zealand market because of its
technological edge. While the new National government is not likely
to place an order for additional military aircraft, the government
is eager to work with Boeing to introduce biofuels in aircraft in
order to reduce the country's carbon footprint. End Summary.

Boeing competes with Airbus for Billion Dollar Deal
-------------- --------------


2. (SBU) Craig Saddler, President of Boeing's Australia and South
Pacific Office, met with Embassy staff and announced that his
company would be entering a new round of tendering in March 2009 to
secure a potentially lucrative contract worth US$1.2 billion to
supply Air New Zealand with fifteen new aircraft. Boeing is hoping
to sell fifteen 737s to enhance the Air New Zealand's commercial
fleet. The principle competition in this tender comes from Airbus,
which hopes to sell its alternative model A320s in the hope of
gaining greater market share.


3. (U) Air New Zealand currently has on order eight Boeing 787-9
Dreamliners worth approximately US$1.5 billion. Air New Zealand was
the second airline company to order the advanced 787 model, placing
its initial order for two airplanes in 2004. The new aircraft are
important to Air New Zealand's growth plans over the next decade to
extend their long-haul capabilities to a variety of destinations in
Africa, India, the Americas and Asia. Despite production setbacks
due to strikes at Boeing's American plants last year, Boeing hopes
to deliver the first aircraft by the end of 2010, with full delivery
by 2013. Given the current financial picture, Air New Zealand told
Saddler that the delay in delivery was not an issue. Air New
Zealand also has four 777-300ER aircraft on order from Boeing worth
an additional US$1 billion which are scheduled for delivery in 2010
and 2011.

Boeing's Comparative Advantage
--------------

4 (SBU) The technologically advanced 787 is an entirely new
airplane incorporating composite technologies (carbon fiber) and new
engines that contribute to operating fuel and environmental
efficiencies and performance characteristics exceeding conventional
airframes. Saddler claimed that Boeing's technological advantage
cannot be easily matched by Airbus, resulting in a growth in the
company's orders for new aircraft now approaching 1,000
internationally (versus 300 Airbus order, per Saddler). Saddler
said that Airbus has tried to reproduce the advanced composite
structure but has only been able to produce panels and cannot match
the single fuselage design.

Boeing Looks for Opportunities with New Government
-------------- --------------


5. (SBU) Saddler has been making the rounds in Wellington this week
to introduce himself to members of the new National government. He
met with the Cabinet Ministers for Defence, Environment and
Transport. In his discussions with Defence Minister Wayne Mapp, he
said there was interest in exploring the possibility of the agency
using more modified 757 aircraft. Currently the New Zealand Air
Force operates 2 Boeing 757s but both had been out-of -service last
year while in the U.S. Boeing plant for a US$100 million
retrofit/upgrade. (Note: the lack of the 757s became an issue when
the Air Force had to send a Hercules aircraft to Bangkok in December
rather that the more appropriate 757s to Bangkok to retrieve
stranded Kiwis travelers during the airport strike. End Note.)
Saddler thinks it unlikely that the Defence Ministry will be making
any additional purchases for new military aircraft and will continue
to rely on the older P3s for the foreseeable future.

6 (SBU) Saddler also said that in his meeting with Environment
Minister Nick Smith, he had an opportunity to discuss the first

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successful test flight using biofuel by Air New Zealand in a Boeing
aircraft in December 2008 (see Reftel). Saddler stated that his
company is committed to expanding the use of a biofuel mixture to
improve the carbon footprint of the industry. He predicted that
within five years, approximately 10 percent of the Air New Zealand
fleet will be operating on a biofuel mixture produced from jatropha
- an inedible plant.


7. (SBU) In contrasting his meeting with the National government,
Saddler recounted a meeting he once had in Sydney with former Labour
Prime Minister Helen Clark who asked him to consider building a
Boeing plant in New Zealand. He said that the PM had to be reminded
that without the possibility of the GNZ purchasing any Boeing
planes, it was unlikely there was a profit incentive to expand
operations in New Zealand.

KEEGAN