Ryanair Bucks the Trend (Again) With Boeing Order
- For all of Ryanair’s many competitive advantages, few are as powerful as the favorable prices it pays for its airplanes. Why does it pay less than most of its rivals? The answer lies partly with timing, as it demonstrated again last week. In the first major industry aircraft order since the onset of the Covid crisis, Ryanair agreed to buy another 75 aircraft from Boeing. Adding to the intrigue: They’re B737 MAXs, the plane grounded for almost two years after two fatal accidents. For all of the concerns about safety (hopefully now addressed), airlines love the plane’s economics.
Ryanair speaks glowingly about the 16% increase in fuel efficiency versus the B737-800. The MAX is better for revenues too, with eight additional seats to sell. The LCC is buying a somewhat altered version of the MAX, now dubbed the MAX 8 200, with more capacity than the standard MAX 8. In total, it now has 210 of these on firm order, with deliveries starting this spring and continuing through 2024. By this summer, regardless of demand, it plans to have at least 50 MAXs, provided Boeing can deliver them fast enough. The order once again demonstrates Ryanair’s willingness to buy planes during even the deepest industry downturns — it did so during the last recession as well.
That said, its initial MAX order came in 2014, a boom year for the aircraft market. Even then, the carrier’s good credit, its growth prospects, and its willingness to buy in bulk led Boeing to offer favorable pricing. This time, Ryanair also received compensation for getting its MAXs so late, partly in the form of price discounts. Is Ryanair now done with its ordering? Probably not. It’s still very much interested in the largest version of the MAX: The MAX 10.
And Boeing? Will it win any other MAX orders while the Covid crisis still rages? Alaska needs more. Southwest needs planes in the MAX 7 size category. Air France/KLM has large narrowbody replacement needs. IAG has a conditional MAX order it might decide to firm. There’s plenty of demand, in other words, still out there.
- Boeing, at a Credit Suisse investor event, thanked Ryanair for its business and agreed that more MAX orders could come as the industry recovers — shorthaul markets will lead the recovery. Widebody demand will take longer to recover, and Boeing is sure enough cutting B787 production rates again. It now plans to build just five per month by mid-2021, not six. As for the delayed B777-X, which doesn’t have many buyers, Boeing continues to work with regulators on readying the plane for service. The new and improved B777 has just eight known customers to date, albeit a quite prominent list of eight — Emirates, Qatar Airways, Etihad, Cathay Pacific, All Nippon, Lufthansa, Singapore Airlines, and British Airways.
Boeing does see widebody demand picking up before too long, if simply due to all the longhaul aircraft permanently retired during the crisis. Chinese carriers too, will eventually need lots of new widebodies. Boeing had nothing new to say about the NMA — it continues to study the merits of building a new mid-sized aircraft slotted between its largest MAXs and smallest Dreamliners.