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Ryanair close to placing $10 billion Boeing order

Sept. 5, 2014, Dublin, Ireland - Irish low-cost airline Ryanair is in advanced talks to buy at least 100 Boeing 737 MAX jetliners with extra seats in a potential $10-billion (U.S.) deal that could be finalied in days or weeks, two people familiar with the matter said.


September 5, 2014
By Reuters

The move comes two months after Boeing said it was studying plans to
offer more seating in its upcoming 737 MAX by introducing a version with
200 seats, 11 more than the current maximum.

A deal for about 100 of those aircraft could be reached as early as
the middle of September, one of the people said, asking not to be
identified because the talks are confidential.

 

“Ryanair does not
comment upon, or engage in, rumor or speculation,” a spokesman for the
airline said. A European spokesman for Boeing Co. declined to comment.

 

A
new order from Europe’s biggest no-frills carrier would mark a new
phase in efforts by Boeing and European rival Airbus to appeal to
ultra-low cost carriers.

 

Both manufacturers are adding seats to drive down the operating costs per seat, the key driver of aircraft economics.

 

“The
200-seat version is almost tailor made for Ryanair,” said Stephen
Furlong, an analyst with Davy Stockbrokers in Dublin. “In addition to
the fuel efficiency, the extra seats should give them an extra 5 per
cent unit cost savings.”

 

Keeping up demand for the most popular
types of airliner has become the Holy Grail for both planemakers as they
embark on ambitious production plans, with higher output volumes
playing an important role in cutting costs and boosting margins.

 

In
June, Airbus said it would increase the maximum number of seats on its
revamped A320neo to 189, matching the capacity limit on the main variant
of the Boeing 737 MAX and providing fuel savings of 3.5 per cent per
seat.

 

Weeks later, Boeing leapfrogged its European rival by
announcing plans to offer a 200-seat version of the 737-8 MAX, which
Boeing Commercial Airplanes Chief Executive Ray Conner said would offer
unspecified cost savings of 5 per cent per seat.

 

One industry
source said Ryanair was expected to place a large order for the modified
version of the 737-8 MAX and that this could happen “soon”.

 

Another source said Ryanair had been shopping for at least 100 and possibly as many as 150 of the higher-capacity aircraft.

 

Ryanair
shares were up 0.8 per cent at 1525 GMT, compared with a fall of 0.4
per cent on the Thomson Reuters Europe Airlines Index.

 

Ryanair
Chief Executive Michael O’Leary, who has developed a reputation for
securing bargain aircraft, would be able to take advantage of low
interest rates and Boeing’s eagerness to have a large launch customer
for its latest variant of the MAX.

 

He has long lobbied aircraft
makers to produce a plane with just under 200 seats to maximize the
ratio of passengers to cabin crew. Airlines must provide one flight
attendant for every 50 passengers.

 

O’Leary offered at one point to buy planes from Chinese manufacturer Comac if they filled this requirement.

 

Ryanair
last year signed a $15.6-billion contract to buy 175 Boeing 737-800
jets, the largest single order ever placed by a European airline with
Boeing, with the first of the aircraft due for delivery later this
month. It later upped the order to 180.

 

It needs the planes to boost its traffic to 120 million passengers per year by 2022 from just over 80 million today.

 

In
July, O’Leary welcomed the decision to study a higher-density version
of the 737 MAX and said he would maintain the order for
current-generation 737.

 

“We will take those aircraft as is, but
for the next round of aircraft, (for the period) 2019 to 2025, we are
looking at the 189-seat Airbus or what I hope will be a 197– to 198-seat
737,” he was quoted as saying by Flightglobal.

 

Ryanair has had
somewhat bumpy relations with Airbus, but discussed the possibility of
breaking away from Boeing as an exclusive supplier as it continues to
expand, according to industry sources. However, Airbus was seen as
unwilling to match Boeing’s prices for the airline.

 

“Ryanair are a
massive customer for Boeing, so they will clearly treat them well,”
said Davy analyst Stephen Furlong. “If you were Boeing and you lost
Ryanair, that would be huge. There is dependence, but its mutual.”