INTERVIEW: Air New Zealand Fears Further Dreamliner Delays

Air New Zealand Ltd. (AIR.NZ)--which will be the first recipient of the stretched version of Boeing Co.'s (BA) 787 Dreamliner aircraft--fears further delays in delivery which won't see the plane in service until mid-2014, Chief Executive Rob Fyfe said Wednesday.

"The Dreamliner. It was aptly named, wasn't it," Fyfe said in an interview in Singapore.

The first 787-9 aircraft out of eight ordered by Air New Zealand is currently scheduled to be delivered by the end of 2013, a three-year delay.

"We're not optimistic the aircraft is going to arrive on that date. We still think there's quite a high risk of further delays," he said adding "the delays have certainly caused us some real concerns and created a number of risks for our business."

Fyfe said that some possible new routes for Air New Zealand are only profitable if operated by one carrier and the potential entry of a competitor could lock it out. He didn't identity those routes.

"The strategic risks are very high. We haven't been able to fully adjust our fleet to reflect the delays in the Dreamliner. So we have less aircraft in our fleet today and that's restricted some of our expansion," he said.

Air New Zealand will be the first carrier to fly the 787-9 variant, which can seat more passengers and fly further than the version delivered last month to Japan's All Nippon Airways Co. Ltd. (9202.TO), marking the first delivery in Boeing's ambitious Dreamliner project. The aircraft is Boeing's most fuel-efficient aircraft and the world's first commercial airliner to use composite materials for most of its construction.

The Auckland-based airline, 76.5% owned by the government, also has no plans to increase its stake in Virgin Australia Airlines (VBA.AU), the chief executive said. Last month, Air New Zealand said it would raise its stake in Virgin by as much as 5%, up to a maximum of 19.99%.

"We see Virgin as the most valuable regional partner we could work with in the Australasian region if we are to provide a counterbalance to Qantas-Jetstar route position," he said.

The carrier, a member of the Star Alliance, is seeking to partner with more airlines to grow its business, especially in Asia, the fastest growing market for aviation, Fyfe said. However, Air New Zealand is unlikely to seek equity stakes in regional carriers, he said.

-By Gaurav Raghuvanshi, Dow Jones Newswires; [phone]; [e-mail]