Ryanair handed Boeing its largest European order on Tuesday with a deal worth $16-billion (U.S.) at list prices to buy 175 passenger jets, boosting the U.S. 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 increase passenger numbers by 25 per cent 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 carriers and is a welcome lift to the U.S. company after Indonesia’s Lion Air on Monday picked European rival Airbus in a $24-billion mega-order.
Lion Air had been an exclusively Boeing customer for jets.
The industry benchmark 737-800 model, a 189-seat aircraft whose main competitor is the Airbus A320, is worth $89.1-million at list prices, but large orders attract steep discounts and industry appraisers value the plane closer to $40-million.
“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 a reputation for securing bargain aircraft orders during industry slumps, declined to say how much of a discount he obtained for the order, but he said Boeing’s struggles with the 787 had created an opportunity for both sides.
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.
Boeing Commercial Airplanes Chief Executive Ray Conner said Boeing has not had any difficulty closing major aircraft orders despite the ongoing battery problems with its 787 passenger jet.
“We compartmentalize that. We have a lot of people working on the 787 situation ... We’re working on producing 787s as we get the battery situation solved,” Conner said at a New York news conference on Tuesday.
“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 U.S. 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 U.S. Federal Aviation Administration last week approved Boeing’s plan for testing a revamped battery system for the plane, including tests Boeing had helped develop 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 per cent fuel savings from the middle of the decade, raising the prospect of bargains on the outgoing models to help manufacturers ensure steady production.
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.