Air NZ says breakthrough reached on engine drama, IATA boss tells engine makers: ‘Stop gouging us’

Ravishankar said his airline’s relationship with Rolls-Royce and Pratt & Whitney had improved, and the fleet was approaching full strength.

He said by the end of this month, there would be one grounded aircraft in the Airbus A320neo/321neo narrowbody jet fleet.

The Airbus in question had a Pratt & Whitney PW1100G engine.

“That’s from the heights of having 20% of our jet fleet grounded down to now just two aircraft.

“We’re now almost down to one grounded aircraft on both of our fleets. So we’ve had our Rolls-Royce engines go through the Rolls-Royce engine shop and come back, a couple of them as quickly as in 35 days, which is a massive improvement to what we’ve been seeing in the past.”

One widebody, a 787 with a Rolls-Royce Trent 1000 engine, was still grounded.

The airline has announced cutbacks, understood to be at management level just below C-suite.

But Ravishankar said: “We’ve held a lot of labour capacity, particularly in the operations, cabin crew, pilots, engineers, in anticipation of having these [aircraft] returned to service.

“If anything, the thing that’s suppressing demand at the moment is the fact that the fuel price is as high as it is.”

That especially impacted inbound demand, he said, for both transtasman and longer-haul routes.

He said between now and the end of the next financial year, in June 2027, Air NZ would fluctuate between full strength and two jet aircraft not in service.

That depended on how many engine cycles were left in each aircraft and when they needed to go “back into the shop” for maintenance.

Air NZ should also be unbound from some engine leases.

“To deal with the engine issues ... we ended up leasing a lot of spare engines, so on the Pratt & Whitney Neo fleet, we had at least an extra 15 engines on top of what we required.

“Normally, we would have a fleet of 44 engines because we have 20 Neos. Instead, we have 59 engines.”

He said the rule of thumb was two engines per aircraft, and then 10% spare.

“So getting back to the 44, 45 sort of level, that’ll take another a year and a half.”

By the end of 2027, those extra costs for the narrowbody leases should be released, he said.

In the widebody fleet, he said the airline couldn’t lease engines in a similar way so had to lease four aircraft.

Three were dry leases from Cathay Pacific. One was a wet lease from a different provider.

In dry leases, an airline typically got the aircraft but had to take care of crew, maintenance or insurance itself.

One dry lease would be gone by this October and other widebody leases by the end of 2027, he said.

The airline would benefit from a tax tweak announced in last month’s Budget, where the Government ditched a tax for dry leasing aircraft parts.

Ravishankar said two new Boeing 787-9s were going through certification now.

“So we’re expecting to have them flying from November this year.”

As for regional routes, the Herald asked if the airline could commit to retaining every single point-to-point route in New Zealand.

“Even through the fuel crisis, we have retained all of the routes.”

He said consolidations or frequency reductions on those routes were related to recent high jet fuel prices.

“Regional aviation is extremely important to New Zealand and we should all be working together to ensure that we can have a thriving air connectivity solution for the country.

“And the good thing is, we are all working together, there’s a lot of effort going on behind the scenes, a lot of great engagement.”

He said regional airports, local governments, and central government were engaging on the issue.

He said he was confident that work would yield “good results”.

MORE FROM RIO: World airline summit: Should NZ carriers get handouts to save routes?

The Iata summit heard the Northern Hemisphere summer outlook was looking promising.

That would largely affect North America-Europe traffic, or people leaving Europe for a variety of their summer getaways, Ravishankar said.

But he said for New Zealand’s peak, what Iata called the northern winter, inbound demand was expected to be strong.

He said tourism was becoming a more dependable earner for the country.

“We’re seeing a very steady growth in that space, which is very encouraging actually, not just for Air New Zealand, but for New Zealand.”

He said one area for improvement was “breaking the seasonality cycle” so a smoother flow of visitor arrivals occurred throughout the year.

“It’d be good to break seasonality and the other thing we need to really work hard on is dispersal of tourists around the country.”

He said tourism numbers were currently concentrated in just a few locations.

“This is where our regional turboprop business is such an asset for the tourism sector.”

Iata director general Willie Walsh blasted manufacturers as the global airline fleet reached averages of more than 15 years old.

Walsh in Brazil today said his views of supply chain delays might not be suitable for polite company.

But then he told the crowd there was no need to be polite.

“Stop gouging us and get back to making great engines that work and that last.”

He added: “The aerospace supply chain continues its failure to deliver engines and aircraft parts.”

Walsh said most engine manufacturers had booming profits, in contrast to airlines’ wafer-thin margins.

The airline leader directed ire at OEMs (original equipment manufacturers) and especially engine makers.

He said the ageing fleet meant added costs for maintenance and fuel, as a backlog included fewer new fuel-efficient aircraft.

Walsh said worldwide, airline profits were down about half this year.

He said the airline business had been reeling from record-high jet fuel prices but demand was at least holding up.

Iata today said airlines would have a combined total net profit of US$23 billion ($39.7b) this year, down from the previously expected US$41b.

“It is also roughly half the US$45b net profit estimate for 2025.”

Asked if the current situation was as bad for aviation as Covid was, Walsh was emphatic.

He said the airline industry was still profitable, and resilient, whereas at one point in 2020 the industry was 95% grounded.

“Aviation changes the lives of over five billion travellers annually.”

He said the sector employed 86.5 million people.

“Aviation makes the world a better place by bringing people together,” he added.

AGM-related events continue in Rio de Janeiro this weekend, Brazil time.

Iata announced next year’s AGM will be in the southeast Chinese city of Xiamen.

The next Iata director general is yet to be announced. A press briefing heard a decision may still be several weeks or more away.

-The Herald travelled to Brazil courtesy of Iata and Latam Airlines.

John Weekes is a business journalist covering aviation. He previously covered consumer affairs, crime, politics and courts.