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Dec 3, 2020

Boeing lands crucial Max deal from Ryanair as grounding ends

Ryanair Orders 75 Boeing 737 Max Jets

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Boeing Co. sealed a landmark order for its 737 Max jet from Ryanair Holdings Plc, boosting the U.S. planemaker’s efforts to revive its best-selling model after a 20-month grounding.

Dublin-based Ryanair will add to an existing Max purchase by taking 75 more of the single-aisle aircraft, the companies said in a statement Thursday. The firm order has a list value of US$9.4 billion before significant discounts that are customary for plane purchases.

The deal gives the embattled Max a seal of approval from Europe’s most valuable airline as Boeing attempts to restore global confidence in the workhorse jetliner. Regulators worldwide grounded the aircraft in March 2019 after two crashes in less than five months killed 346 people. It was cleared to fly again by the U.S. Federal Aviation Administration last month, while European regulators granted preliminary approval.

Boeing Chief Executive Officer Dave Calhoun said on a media call that his company had updated Ryanair on the Max’s progress every few weeks and that the expanded order represents a vital vote of confidence.

“We have had one rough year,” Calhoun said. “This is a story of faith. Belief and faith in the future of our industry.” He pledged to “continue the work to re-earn the trust of all of our customers.”

Boeing was priced 6.1 per cent higher at US$237.52 at 10:48 a.m. in New York, paring the stock’s decline in 2020 to 27 per cent.

Ryanair traded up 1.8 per cent at 16.09 euros in the Irish capital and has added 10 per cent this year, making it one of only five carriers in positive territory in the 27-member Bloomberg World Airlines Index.

The additional jets position Ryanair to expand in coming years as travel rebounds from a collapse caused by the coronavirus pandemic, and financially weaker competitors nurse their balance sheets back to health. In an interview with Bloomberg TV CEO Michael O’Leary called the plane a “game-changer” that will add capacity while reducing fuel burn.

The order takes Ryanair’s Max backlog to 210 planes, all of them higher capacity -200 variants, with deliveries set to commence in the spring and 50 set to arrive by the end of 2021. Talks are continuing on a possible further deal for the bigger Max 10, O’Leary said.

The CEO said he had “analyzed, audited, refined and reviewed” the process for the jet’s return, adding: “I can’t tell you how confident we are in the safety of this aircraft.”

Ryanair and Boeing agreed to revised delivery dates for the Max following its idling which will see them compressed into four years, together with compensation to cover direct costs incurred.

Some of that money was factored in as a “modest reduction” in the final pricing of the new aircraft, according to the carrier.

Calhoun said that Boeing’s doesn’t need to discount its way back into the marketplace, and that there are no plans to drop the Max name.

The CEO added that he’s “very proud” of how the company responded to the combination of the Max crisis and the COVID-19 pandemic, which forced cuts that will peel away about a third of its workforce. Boeing will emerge “leaner, faster, better, smarter and most important, safer,” he pledged.

Boeing has lost hundreds of orders for the Max this year, ceding ground to Airbus SE and enabling the European manufacturer to widen its lead in the critical market for narrow-body jets.

While both companies have been in intense negotiations with customers because of the pandemic, Boeing has had to contend with the added burden of resolving compensation claims for deliveries that were postponed due to the Max’s idling.

The grounding has given customers the ability to walk away from contracts where delivery was delayed for more than a year. Boeing has also been seeking new homes for about 100 so-called white tails -- jets built during the hiatus and later abandoned by buyers.

Boeing has garnered a handful of small orders for the Max since the plane’s grounding, and last year landed a letter of intent for 200 planes from British Airways owner IAG SA. That deal hasn’t been finalized.

Ryanair first ordered the Max in 2014, and O’Leary has been a vocal supporter of the model during the grounding.

While the pandemic has decimated travel, the CEO has said he expects the availability of a vaccine to boost traffic to near-normal levels by summer 2021 -- and possibly by Easter, which falls in early April.

--With assistance from Tony Robinson, Guy Johnson and Alix Steel.