Air New Zealand Tempers Next-Gen Aircraft Hopes

Air New Zealand is cooling on next-generation aircraft and its talking down its ability to reduce its environmental footprint, at least in the short to medium term. 

Just a couple of years ago, the majority government-owned airline was bullish on the opportunities next-generation aircraft offered. It signed a raft of agreements with developers, some of whom have since gone out of business. 

However, Air New Zealand’s most recent sustainability report, released late last month, suggests the airline’s optimism about next-generation aircraft and sustainable aviation fuel making a major impact over the next decade is lessening.

Next-generation aircraft is a catch-all phrase covering aircraft powered by non-traditional aviation fuel. This includes hydrogen fuel cells, hydrogen combustion, batteries, and various fuels made from waste materials, plants, and other by-products, among other. These fuel sources are better for the environment than traditional aviation fuel, which is a refined oil-based product.

Air New Zealand has traditionally made a lot of noise about its desire to reduce its environmental footprint. “Aviation is critical for our country's connection to each other and to the world, and for business, trade and tourism,” the airline’s website reads. “But it also creates greenhouse gas emissions that contribute to the climate crisis.”

Aviation contributes about 2.5% of global CO2 emissions and a larger overall share of warming because of other emissions like water vapor and soot. But the world’s skies are getting busier and aviation’s contribution to greenhouse gas emissions continues to grow.

While Air New Zealand is only a small part of the global aviation industry, the airline is also growing, adding new aircraft and more flights. This reflects the global trend. Air New Zealand is working towards net-zero carbon emissions by 2050 and wants significant reductions in its environmental impact before then.

But in May 2024, Air New Zealand dropped its 2030 goal to cut its carbon emissions. It blamed difficulties around acquiring more efficient planes and sustainable jet fuel.

Next generation aircraft not yet taking off 

In recent years, Air New Zealand has encouraged multiple manufacturers of next-generation aircraft and alternative fuels to develop their technologies. Among others, the airlines signed memorandums of understanding with the New Zealand Government on sustainable aviation fuel and with Airbus and ATR on the development of low emissions aircraft.

In 2022, Air New Zealand shipped in 1.2 million litres of sustainable aviation fuel made from sustainably sourced, renewable waste and residue raw materials to blend with traditional aviation fuel to use on domestic jet flights.

“The future of travel relies on low-carbon air transport,” said CEO Greg Foran at the time.

That fuel importation followed Air New Zealand soliciting “ideas and insights” from over 30 next-generation aircraft manufacturers, aiming to operate a commercial demonstrator flight in 2026 and eventually replace its existing Dash 8 aircraft with more sustainable aircraft, potentially powered by green hydrogen or battery hybrid systems, from 2030.

Those manufacturers included Beta Technologies, Heart Aerospace, Embraer, Universal Hydrogen, Avolon, Eviation and VoltAero. Air New Zealand later choose BETA's ALIA product as its next-generation airline partner. It placed a firm order for one aircraft with options for an additional two aircraft, and rights for a further 20 aircraft.

“The future of our entire planet depends on the global transition to net zero by 2050,” said Foran in the airline’s 2023 Sustainability Report. “Air New Zealand has its part to play. To carry on connecting New Zealanders with each other and the world, we must decarbonise our operations. As we witness this threat to the planet unfold, we have never felt more resolute about the work we have ahead of us.”

But Foran, who is standing down as CEO in October 2025, acknowledged the challenges were significant. “Aviation is one of the hardest sectors to abate, there are very few levers available to us, and we don't control them all,” he said.

Commercial realities come into play

Reflecting the commercial realities of reducing the aviation industry's greenhouse gas emissions, as well as the market conditions for startups, next generation aircraft manufacturers Universal Hydrogen, Supernal, and Lilium have all gone bust since Air New Zealand tapped them for insights and ideas four years ago.

Air New Zealand has also tempered its ability to easily reduce its environmental impact. In its 2025 Sustainability Report it says next-generation aircraft are expected to play a “significantly reduced” role in achieving its 2050 environmental targets than expected as recently as 2024.

It says for next-generation aircraft to replace some or all of its Dash 8 fleet, the airline would require the commercial availability of scalable next-generation aircraft technology, plus significant changes across the regulatory environment, energy sector, and airport infrastructure. Air New Zealand does not expect this to occur any time soon.

But the airline says it remains supportive of next-generation aircraft. It has agreed to a term sheet and paid a deposit on that first one-battery powered all-electric ALIA aircraft, which it initially plans to use as a demonstrator on a very short regional route. However, the aircraft will have no material impact on Air New Zealand’s carbon emissions.

Air New Zealand says the entire next-generation aircraft industry remains in its infancy and is subject to material uncertainties. It says the initial battery prototypes are heavy and have significant range limitations. The airline also notes that the sustainable aviation fuel industry is nascent and is more expensive than traditional aviation fuel.

“The airline’s ability to achieve its decarbonisation goals depends on its ability to access sustainable aviation fuel at commercially viable prices,” Air New Zealand’s latest sustainability report reads. “Global price premiums for biogenic sustainable aviation fuel range from just above parity to approximately five times the cost of fossil jet fuel, depending on the feedstock used, production pathway, and location.”

Air New Zealand says its remains committed to reducing its environmental footprint. Its latest sustainability report reflects this. It is extensive and detailed. But the airline is also starting to realise that doing so will be more complicated and take longer than previously expected.

Photo: Air New Zealand.