Ryanair threatens Boeing with possible cancelations

[Eric Diffoot]

Ryanair Presses Boeing For Price Cuts


Nov 2, 2009

Robert Wall/Paris wall@aviationweek.com

Faced with sustained yield pressure and pressure on its still positive bottom line, Ryanair is threatening Boeing that it will curtail growth, slow or cancel aircraft deliveries and abandon a plan to acquire 200 more 737-800s unless the aircraft maker drops its price. Ryanair CEO Michael O'Leary used the announcement of first-half results to issue the warning to Boeing. If, by yearend, the aircraft maker isn't meeting O'Leary's terms, "Ryanair will end its relationship with Boeing and confirm a series of order deferrals and cancellations. We see no point in continuing to grow rapidly in a declining yield environment where our main aircraft partner is unwilling to play its part in our cost-reduction program by passing on some of the enormous savings which Boeing has enjoyed both from suppliers and more efficient manufacturing in recent years," O'Leary said. Ryanair has said for some time it wants to place an order for another 200 narrowbodies, with deliveries to unfold between 2013 and 2016. O'Leary says he'd prefer growth, but would distribute cash in the form of dividends if the aircraft price isn't right. Airbus, Boeing's usual rival for big orders, has already indicated it isn't interested in talking to Ryanair, since it doesn't think the big 737 operator is serious about switching to another aircraft type. In its earnings release, Ryanair reported first-half profit growth of 80% to ¬387 million on 15% more traffic, but a 17% decline in average fares. Revenue was also down 2%. The results were bolstered largely by a 42% drop in fuel costs - unit costs excluding fuel were also down 5%. To help protect itself against fuel price fluctuations, Ryanair has started hedging into the fiscal 2011 year, with prices locked in for 50% of the first-half-year's demand. Yield declines in the winter are expected to be 20%. The low-fare airline has warned about that development for some time and therefore is holding to its full-year guidance of a net profit of 200-300 million pounds at yearend. Photo credit: Boeing http://www.aviationweek.com/aw/gener...20Price%20Cuts Those ain't some fighting words coming from O'Leary, like that going to help him. When you have Boeing as your main supplier and Airbus not interested in talking to you, ouch, it isn't good to piss off your only supplier. Someone's bluffing.

[SAMRPICS]

Just trying to imagine if they did swap to Airbus A319's what they would look like. I know that they wont because they are already far to commited to Boeing to carry out such a switch. Easyjet only got away with such a change because their fleet of 737's was relatively small in comparison. The question now is what will Boeing do. My personal opinion is they will have to make some sort of move in this current climate because otherwise they will lose some much needed business. On the other hand at lower prices will they be as bothered since they wont make as much cash on those jets and if they yield to Ryanair others will try to follow suite. I wouldnt like to call Boeings next move on this if im honest.

[HB-IHC]

Originally Posted by SAMRPICS

Just trying to imagine if they did swap to Airbus A319's what they would look like. I know that they wont because they are already far to commited to Boeing to carry out such a switch. Easyjet only got away with such a change because their fleet of 737's was relatively small in comparison. The question now is what will Boeing do. My personal opinion is they will have to make some sort of move in this current climate because otherwise they will lose some much needed business. On the other hand at lower prices will they be as bothered since they wont make as much cash on those jets and if they yield to Ryanair others will try to follow suite. I wouldnt like to call Boeings next move on this if im honest.

I think you make a very good point about the possible consequences of yielding to Mr.O'Leary.

On a personal note, I don't want Ryanair to grow - before you know it we'll have to pay to breath on their "low cost" flights - and I certainly don't want to see Boeing going under because they can't get a decent price for a decent aircraft.

I guess I know what I'd do if the decision was mine!

[landing-gear]

Who does O'Leary think he is?

Boeing is better off without the D***.
You can stay in bed and earn nothing, so why build this loud mouth a new fleet at such a low price.
I think O'Leary is gonna shoot himself in the foot because if Boeing give him the finger, i dont think Airbus will want to even talk with him!
Who's next on the the list????
Bombardier CRJ
Embraer E170
Cessna Caravans

[SAMRPICS]

First one in after Ryanair for a discount would be Southwest Airlines. In other words two of the biggest Boeing 737NG customers if not the biggest two. Could also work in their favour with regard to new customers going to them for discounted aircraft. Trouble comes when they try to put the list price up again to put their margins back. Personally i dont want to see Boeing yield to the demands of O Leary.

[Eric Diffoot]

The problem for Ryanair is not just O'Leary's mouth but no one really is backing him up in his proposals, no one big in a sense. I would think maybe Boeing would listen to Southwest but with Ryanair, I believe in both Airbus's and Boeing's eyes they see O'Leary being able to talk the talk, but not walk the walk, and he's a frikin idiot.

[cja]

Ryanair think that they have a dominant position and so are able to screw their suppliers (and staff). That is what businesses can do if they have a wealth of suppliers to choose from and a strong market share. When it comes to new aircraft however, they have a choice of only two, so it is going to be harder to play that game. If Airbus won't play ball with O'Leary why should Boeing listen to his threats, where else can he go! If Airbus will not entertain him then this is a very weak play from O'Leary. His business model depends on expansion so saying that he just won't expand his fleet is most likely to be just a bluff which Boeing should call. (Of course there are always plenty of used 737s parked up waiting for customers).

[ihatemondays]

I do not fly frequently enough that I think it is a good trade-off to drive two hours each for out-of-the-way airports (e.g. EDFH) on an unsure chance of saving a few bucks (ever checked the surplus costs beside that nominal ticket fee?) and certaincy of a narrow-pitch seat. If I board a short-range flight, I usually do it because it's saving me time in acceptable conditions in Y class. There are more than half a dozen carriers around Europe that qualify.

On my usage profile, I would not miss Ryanair, never been on board, doubt I ever will be. Compared to that, Southwest also flies to major airports and if I lived in the states, I'd most probably be a customer every now and then.

My best guess: Hot air from a windbag. Let's make some noise and see who's reacting. Airbus told him to GFY, so he could rethink ordering Tupolev instead? Or refurbished 734's/752's? In the 738's pax capacity range, there are few vendors. Besides, it was simply too quiet for some time... just a shot at getting back into the talks.

Hey, maybe Boeing should pay Ryanair to fly their birds as it might be promotion for the brand?

Pathetic!

ToM

[landing-gear]

Originally Posted by ihatemondays

. Airbus told him to GFY,

LMAO...........

[W7PSK]

Ryan Air

The Walmart of the airlines.