Ryanair buys 175 Boeing planes to take up slack as rivals battle

Bloomberg

A Ryanair Boeing 737 aircraft pictured landing at Dublin Airport, Ireland today 09 June 2011. Photograph: Aidan Crawley

Robert Wall London

Ryanair has agreed to buy 175 Boeing 737 jets worth $15.6 billion (R143.4bn) at list price to add discount flights in markets vacated by full-service rivals, and said yesterday that it might opt to add 200 more by the end of the year.

Ryanair would initially take the 737-800 version of the single-aisle plane, and could become a “lead customer” for the re-engined Max model for the follow-on requirement, chief executive Michael O’Leary said.

Europe’s biggest low-cost carrier last placed a major order in 2005 and has been contemplating a new deal for more than three years, with deliveries from Boeing having ended last December. The carrier got a heavy discount on the last purchase and the new accord had similar terms, O’Leary said.

“We needed this order to fill the gaps left by the likes of Iberia in Spain and SAS in Scandinavia as the network airlines concentrate on long-haul and feeder services,” the chief executive said. “We could be looking at 100 or 200 more when we decide on the Max, depending on how much the market opens up.”

The new planes, scheduled for delivery between late 2014 and 2018, would permit 5 percent annual growth and take passenger numbers above 100 million from 79 million in 2012, Ryanair said. A Max order would address expansion through 2019.

“This puts Ryanair back on a growth track which they were at risk of not seeing,” said Donal O’Neill, an analyst at Goodbody Stockbrokers, adding that staggered growth should minimise pressure on ticket prices.

O’Leary said there had been a “significant uptick” in growth opportunities in the past year, with the failure of Spanair and Hungary’s Malév plus job cuts at carriers such as SAS and discount rival Air Berlin.

Of the planes bought yesterday, 75 will replace older ones, with the rest adding capacity, taking the fleet toward 400 aircraft, all of them 737-800s. The fleet might grow to more than 500 jetliners with a follow-on order that could reach a list price of more than $20bn.

Ryanair had said it was also considering Airbus A320 planes, as well as the C919 from Commercial Aircraft Corporation of China. Another option was to grab jet orders from rivals struggling to fund purchases, but second-hand prices were too high, O’Leary said.

The order, Boeing’s biggest this year, comes after Airbus won deals for more than 400 A320 planes in the past week from Lufthansa, Turkish Airlines and Lion Mentari Airlines of Indonesia. – Bloomberg