Aircraft order negotiations between the major manufacturers and airlines always carry an element of intrigue, but there’s a particularly high wish-I-were-a-fly-on-the-wall feeling regarding Boeing’s talks with Ryanair.
Boeing is no doubt celebrating Tuesday’s massive order from the Irish low-cost carrier for 175 737-800s (still needing to be finalized by the carrier’s shareholders), but Ryanair CEO Michael O’Leary held off on giving Boeing a complete victory for now. There was no commitment—even of the options variety—for the 737 MAX, only a statement from Ryanair that it “continues to evaluate the benefits” of the aircraft set to enter service in 2017.
Does that mean O’Leary wants more from Boeing on the re-engined narrowbody? Or simply a lower buying price than Boeing is currently offering?
The 737-800 order is nevertheless a boost for Boeing, particularly coming a day after Indonesia’s Lion Air ordered 234 Airbus A320neo family aircraft and a few days after Turkish Airlines inked a deal for 82 A320 family aircraft, a mix of the re-engined neo and classic versions.
Boeing Commercial Airplanes president and CEO Ray Conner, speaking to a JP Morgan conference earlier this month, said the transition from building 737NGs to MAXs will be smooth, with both likely to be built simultaneously for a few years. “We feel very good about our bridge from the NG to the MAX,” he said. The Ryanair order will help make that bridge sturdy, ensuring a signature customer for which Boeing will be building 737NGs through at least 2018.
The three big narrobody orders placed in recent days buttress claims by Airbus and Boeing that demand in that segment is robust, global economic concerns notwithstanding. “We have more [narrowbody] demand in some years than our production can handle,” Conner said.
No doubt O’Leary drove a hard bargain in negotiations over the 737-800s. The list price value of the order is $15.6 billion, but it is unlikely Ryanair is paying anything close to that.
O’Leary has some leverage. Some customers are more important than others; when it comes to the 737 line, Southwest Airlines and Ryanair are seen as critical for Boeing. As Conner said in a statement announcing the Ryanair order, the Dublin-based LCC is “of the utmost importance” to Boeing.
Adding more pressure for Boeing and Ryanair to reach a deal now is this week’s visit to the US by Irish Prime Minister Enda Kenny, who is meeting with President Barack Obama at the White House Tuesday. Kenny plans to make a stop later this week in Seattle, where he will be eager to highlight Ryanair’s big order.