Ryanair hits out at its longtime supplier Boeing: Your 737 Max prices are ‘delusional’

November 1, 2021, 1:13 PM UTC

Ryanair’s cantankerous CEO, Michael O’Leary, is taking on Boeing. Again.

The budget carrier is Boeing’s biggest client in Europe, with a firm commitment to buy 737 Max 8-200 narrow-body aircraft worth over $20 billion in total. But that doesn’t mean they’re on the greatest of terms. The two sides had recently been in talks for a follow-up order, before Boeing walked away in September after the two couldn’t agree on terms. 

On Monday, O’Leary decided to dedicate part of the company’s latest financial report to an update on the state of negotiations, and it was, in keeping with O’Leary’s style, full of colorful quotes.

“Boeing is losing customers all over the place,” he said in prerecorded comments to investors following its fiscal second-quarter results through the end of September. 

He added the Chicago-based manufacturer needed its business, arguing that demands for a substantial double-digit price increase flew in the face of an aviation industry still reeling from the pandemic. He warned Boeing could lose business to archrival Airbus due to Boeing’s “delusional” price hikes. The risk of Ryanair switching sides to Airbus is unlikely, however, as the fleet is overwhelmingly made up of Boeing 737s.

That didn’t stop O’Leary from piling on his longtime supplier. He cited cancellations of almost all orders from Norwegian Air, Jet2 switching to Airbus from Boeing, and British Airways operator IAG inviting Airbus to bid for aircraft it initially planned to buy from Boeing under a letter of intent.  

“We don’t really know what Boeing is up to. We think they’re deluded,” said O’Leary, who is no stranger to taking on Boeing when talks sour—and there’s a live mike in the vicinity.

Last week Boeing reported it delivered 62 aircraft of the 737 family in the third quarter, the most since the first three months of 2019. Since the FAA’s approval to return the 737 Max to operation, it has shipped 195 units of the previously scandal-plagued model to customers.

Boeing can count on Ryanair’s firm order for 210 units of the 737 Max 8-200 model, which the Irish budget carrier calls a “game changer” for its business. It plans to take delivery of over 65 planes in total before the peak of next year’s summer season.  

Specially designed for low-cost carriers like Ryanair, the Max packs in an additional eight passengers, or 4% over the conventional version, to total 197 seats while reducing operating costs, thanks to 16% lower fuel bills.

Ryanair is facing plenty of headwinds of its own. Rising fuel prices are pressuring the company’s bottom line just as short-haul travelers return to the skies.

New growth target

The fleet of new aircraft underpins the airline’s new plan in September to grow annual passenger volumes by 50% over their pre-COVID levels to over 225 million on a fleet of roughly 600 aircraft in the fiscal year that ends in March 2026.

Previously, Ryanair had targeted 200 million but expects to capitalize on the consolidation in the industry, in particular thanks to added growth in Italy following a brutal restructuring of Alitalia

“Frankly we have enough aircraft, more aircraft than we need for the next four or five years,” O’Leary said. “We’ll wait until Boeing gets competitive on pricing again before we place another order.” 

O’Leary did, however, praise the reception of the 737 Max 8-200 by crew and customers alike despite recent safety concerns after Lion Air flight 610 crashed in October 2018 and Ethiopian Airlines flight 302 went down about six months later because of faulty flight software.

“We’ve offered all passengers traveling on the Gamechangers if there was some nervousness about them traveling on the Max, they could offload with no quibble and travel on the next available flight,” he said. “We first started flying these aircraft in June. Not one passenger has wanted to get off.”

Separately, Ryanair announced it would consider delisting its shares from the London Stock Exchange due to Brexit. 

While the U.K.’s decision to leave the European Union did result in a sharp decrease in shares traded on the LSE, it was, however, contributing to the airline’s revenue line as customers purchased via Ryanair more duty-free alcohol and cigarettes on flights to and from the country. 

For the first half, the airline posted a net loss of €48 million ($56 million), forecasting red ink of around €100 to €200 million for the full fiscal year owing to the need to stimulate demand during off-season weeks with further price rebates.

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