Reuters/Dublin
Ryanair handed Boeing its largest European order yesterday with a provisional $16bn deal to buy 175 passenger jets, boosting the struggling US plane maker and underlining the Irish airline’s domination of Europe’s low-cost market.
The delivery of current-generation 737-800s will increase Ryanair’s fleet to 400 planes from 300 at present, as old planes are retired, allowing it to grow passenger numbers by 25% over the next five years as rivals plan capacity cuts.
The order, which is subject to Ryanair shareholder approval, maintains the Irish airline as one of the few remaining all-Boeing airlines and is a welcome lift to the US company after Indonesia’s Lion Air on Monday picked European rival Airbus in a $24bn mega-order.
“This deal embeds our cost advantage and pricing advantage over our European competitors,” Ryanair chief executive Michael O’Leary told Reuters in a telephone interview.
“Hopefully it will help refocus people’s minds on the fact that Boeing continues to deliver great aircraft and is growing strongly, rather than a minor issue on the 787,” he said.
O’Leary, who has developed a reputation for securing bargain aircraft orders during industry slumps, declined to say how much of a discount he secured for the order, but he said Boeing’s struggles with the 787 had created an opportunity for both sides. The industry benchmark 737-800 model, a 189-seater aircraft whose main competitor is the Airbus A320, is worth $89.1mn at list prices, but large orders attract steep discounts and industry appraisers value the plane closer to $40mn.
Reuters reported exclusively in late January that Ryanair was closing on a deal for at least 150 current-generation 737 jets to be completed within weeks. Ryanair denied the story at the time.
“This order puts Ryanair back on track for growth at a time when many European airlines are shrinking,” said Donal O’Neill, an analyst with Goodbody Stockbrokers in Dublin. “For Boeing it keeps a major customer on board and helps position it to hook Ryanair for an order of the (next-generation) 737-Max in a few year’s time.”
The Ryanair deal is a timely boost to Boeing, which last week won US approval for test flights for its new 787 Dreamliner, which has been grounded for two months after batteries burned on two of the jets in January.
The US Federal Aviation Administration last week approved Boeing’s plan for testing a revamped battery system for the plane, including tests Boeing had helped developed but not previously used.
Boeing predicted the plane would be back in service in weeks, not months, but its biggest 787 customer, All Nippon Airways, said that prediction was too uncertain for it to base planning on.
The Ryanair deal will also provide Boeing with a smooth transition to its new 737 Max aircraft, scheduled to enter service in 2017.
Boeing and Airbus are upgrading their medium-haul passenger models to offer about 15% fuel savings from the middle of the decade.
O’Leary said the fact that the 737 provided nine more seats than the A320, which is due to be revamped with fuel efficient engines in 2016, was more important to Ryanair than any possible fuel savings.
The Ryanair deal comes a day after Airbus scored a deal for 234 single-aisle passenger planes with low-cost Indonesian carrier Lion Air, which had been one of Boeing’s fastest growing customers.
