Air New Zealand cancels Saudi contract and returns job incomplete

Air New Zealand’s chief executive has confirmed the airline has terminated its contract with the Saudi military and the job will be returned as incomplete. Greg Foran said Air New Zealand was reviewing the process that led to the $3 million contract being signed.

Cheif said, this was a contract agreed back in mid-2019 which was before my time at Air New Zealand. As soon as I became aware of it, it was stopped. Work has stopped on the remaining power turbine under repair and we will be returning the engine to the third-party contractor. This was not a secret deal, our involvement was through a third party and should not have happened. It won’t be repeated.

TVNZ revealed on Sunday evening that an Air New Zealand subsidiary worked on two engines and one power turbine module from vessels belonging to the Saudi Navy through a third-party contract.

The Saudi Navy has been enforcing a blockade on the country of Yemen, stopping food and medicine getting to the war-torn country.

Foran said, as one of a handful of facilities in the world licensed to repair a certain type of engine used on large vessels, the gas turbines business had been contracted to work on naval ship engines from New Zealand, the United States and Australia. The business also occasionally contracts to carry out ad hoc overflow work from third-party repair facilities. It is through a third-party contract that work has recently been carried out on two engines and one power turbine module from vessels belonging to the Royal Saudi Navy. The gas turbines business has not contracted directly with the Royal Saudi Navy and will not be carrying out any further work of this nature. We’re conducting a full internal review which includes working with MFAT, reviewing the Gas Turbines contracting process to ensure improved oversight of work assigned through third party arrangements, and bringing in an external auditor.

Prime Minister Jacinda Ardern said she had asked the Ministry of Foreign Affairs to look into the issue. The Government owns a majority stake in the airline.

Ardern said she learnt of the matter on Sunday because of a media request and said the contract was completely inappropriate.

She said, It just doesn’t pass New Zealand’s sniff test. There was a question mark over whether it breached New Zealand export requirements, and she was asking the Ministry of Foreign Affairs and Trade (MFAT) to look into the matter. This is something that has ramifications for New Zealand, its reputation, and that’s why we are making sure we are across how it happened. We do have obligations as a country to make sure that we are applying, for instance, UN sanctions and so on. Whilst it’s not clear whether what happened here would have fallen within that, there are still reputational issues. I’ve already asked MFAT to look into whether it should fall into the obligations that a country has to check that they are fulfilling the export control orders.

National MP Chris Luxon said on Tuesday he wasn't aware of it happening in his time as chief executive. I have no recollection of it, it might've post-dated my time, but the bottom line is that these are really questions for Air New Zealand. I haven't worked at Air New Zealand for some time but it's good to see that they've come out and admitted this morning that yes there was an error in judgment and they're wanting to do something about that.

Foreign Affairs Minister Nanaia Mahuta said, It came at somewhat of a surprise. My understanding is that the CEO has made contact with (Finance Minister Grant) Robertson, and that matter is being dealt with.