Ryanair, the Irish low-cost airline, has signed a multi-billion dollar deal to purchase up to 300 Boeing planes. This is the latest sign that the travel industry is reviving.
At current list prices, the agreement for the 737 Max-10 aircraft and 150 options is worth more than $40bn, but airlines usually receive significant discounts on large order.
The discussions had collapsed over 18 months earlier due to a price disagreement. The aircraft will be delivered from 2027 to 2033.
This order confirms the popularity of Boeing’s 737 Max, the largest version. It also shows that airlines are eager to invest in new aircraft now that travel is booming after the Covid pandemic.
Boeing and Airbus are struggling to meet demand due to the industry-wide supply problems. Boeing warned last month that a issue with production would hinder deliveries of the Max in the short-term, which Ryanair claimed would result in a few flight cancellations during the summer.
Ryanair said on Tuesday that the new order will allow them to increase their traffic by 80 percent over the next decade. They also forecast an increase in passenger numbers from 168 million at the end March of this year to 300 million by March 2034. About 150 of the new planes will replace Ryanair’s older Boeing 747NG planes.
The airline also said that the agreement will create more than 10 000 new jobs, including pilots and cabin crew.
Michael O’Leary, the chief executive of Ryanair, has criticised Boeing’s leadership and prices over the last 18 months. He also criticized the production issues that have caused delays and cancellations of deliveries in the past two year.
O’Leary stated that the discussions on the order , which re-started in the first half of this year, have accelerated more quickly than expected.
He said that the “meeting of minds” between both companies was a pleasant surprise. The rebound in the industry, he added, was also a factor.
If we had not moved quickly, we could have faced a later delivery in 2028 or even 2029.
O’Leary stated that the deal would also allow Ryanair lower fares throughout Europe. O’Leary said that the airline chose the Max in its largest version, which would offer 21 percent more seats and consume 20 percent less fuel than current 737NGs.
Neil Sorahan, chief financial officer at Ryanair, said that the new aircraft will reduce costs by 10% excluding fuel compared to the older 737NGs still in use.
Ryanair will be able to maintain its competitive advantage and grow further. He estimates that it would transport 30 percent of short-haul European passengers by 2030 if the airline reaches the 300 million passenger target.
He said, “It’s about time we placed another order for aircraft. I’m sure we will return in a few years to look for the next one.”
Ryanair purchased 75 Boeing aircraft during the worst of the pandemic, in December 2020. Sorahan claimed that such prices would never again be offered.
Ryanair’s CEO admitted that it would have liked a “bit more” discount on the Boeing order, but added “we are satisfied with the deal”.
The airlines in Europe are gearing up for a successful summer, after reporting brisk sales in recent weeks and no impact of the wider economic headwinds.
Ryanair led the recovery of the airline industry from the coronavirus outbreak, expanding its schedules as well as moving into new markets while financially weaker competitors retrenched and collapsed.
The airline expects a profit of EUR1.3bn to EUR1.4bn after taxes for the financial year that ends in March.