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Boeing MAX Problems Put European Vacations in Jeopardy

Ireland’s Ryanair has made a hugely successful business model out of jetting holidaymakers around Europe—to places as farflung as Aalborg and Zaragosa—by sticking to a ruthlessly efficient cost-cutting playbook. Key to keeping operating costs in check came down to a decision made long ago to fly only the Boeing 737 class of jets.

That cozy commitment is beginning to rattle markets in the wake of Boeing’s ongoing travails over the downed MAX aircrafts—its most modern and fuel-efficient 737, one that Ryanair made a big bet on. Earlier this week Ryanair Chief Executive Michael O’Leary warned investors that the uncertainty about the availability of the 737 Max would cut into its growth projections and that it would be forced to scale back operations at unspecified airports and abandon whole markets in the interim.

Regulators around the world have forced Boeing to ground the737 MAX following two deadly air crashes in Indonesia and Ethiopia. It’s unclearwhen Boeing will get the green light to fly the planes again. Boeing CEO DennisMuilenburg saidlast month there was no timetable on the plane’s return, adding “this isthe most trying of times.”

That uncertainty is beginning to hit carriers such as Ryanair,Norwegian Air and American Airlines, which are particularly reliant on the narrow-bodyaircraft for their lucrative mid-haul markets.

Shares of Ryanair Holdings are down nearly 10 percent,year-to-date, and have nearly sunk 16% since the March crash of Ethiopian AirlinesFlight 302.

Ryanair, which has gone neck and neck with Lufthansa as Europe’s largest airline by passengers, is banking on the delivery of just 30 Boeing 737 Max planes by next summer—down from a planned 58. “This number could rise or fall further, depending on when the B737 MAX actually returns to flight services,” O’Leary said on a conference call Tuesday. The budget carrier added that its reliance on the beleaguered 737 Max will force it to trim fiscal 2021 growth projections by 5 million passengers, to about 157 million, and force it to reevaluate markets and flight routes.

In all, Ryanair has a fleet of 450 Boeing 737-800 seriesaircraft with plans to grow it to 585 by 2024. According to the company, it’sdoubling down on the MAX to help it push passenger numbers to 200 million peryear in five years. There are “orders of up to 210 new Boeing 737 aircraft,this includes 135 new Boeing 737 MAX 200s, and options for 75 more MAX 200s,”the company says

Ryanair has built its business on low fares. To keep costs down it flies primarily to secondary airports (a good hour from major cities) around Europe, and now North Africa. Last week, it announced three new weekly flights between Paphos, Cyprus and Beirut for as little as 17.99 euros one-way. It also long ago dispelled with travel agents in favor of online booking. And to keep fuel, maintenance and training costs down, it stuck with a single type of airplane—the Boeing 737. The single-plane business model has also helped it consistently achieve top ranking as Europe’s most punctual airline.

Combined, this strategy enabled Ryanair to grow from a regional Irish carrier to one of the world’s biggest in the past two decades. If the company hits its goal of carrying 157 million passengers in fiscal year 2021 that would put it solidly on list of the top 10 largest airlines in the world, by passenger.

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