Ryanair's CEO has said that European airlines are still consolidating.
Brief
- RYANAIR CEO SAYS EUROPEAN AIRLINES ARE STILL CONSOLIDATING
- RYANAIR CEO SAYS MAX 10 WILL BE "NEXT GAMECHANGER" DRIVING SUSTAINABLE PROFIT GROWTH
- BOEING CEO SAYS CFM LEAP JET ENGINES GET BETTER EVERY DAY
- RYANAIR CEO SAYS I WAS TOLD TO SAY THERE WAS A COMPETITIVE DISCOUNT, ALTHOUGH I DID NOT THINK IT WAS PARTICULARLY COMPETITIVE
- RYANAIR CEO SAYS IT PAID MORE PER SEAT THAN IT DID LAST TIME
- RYANAIR CEO SAYS BOEING WANTED US TO COMMIT TO A LARGER ORDER
- BOEING CEO SAYS MAX 10 ON TRACK FOR FAA CERTFICATION IN 2024
- RYANAIR CEO SAYS RYANAIR HAS 'HIGH DEGREE OF CONFIDENCE' IN BOEING
- RYANAIR CEO SAYS I HAVE NO DOUBT THAT BY THE TIME WE GET TO 2027 TO 2033, ALL OF THESE AIRCRAFT WILL DELIVER ON TIME
- RYANAIR CEO SAYS HE'S "PRETTY CONFIDENT" COMPANY WILL GET 48-50 MAX JETS BY END OF JULY
- RYANAIR CEO: HAVE NO CONCERNS ABOUT MAX 10 GETTING CERTIFIED AHEAD OF PLANNED DELIVERIES IN 2027
Ryanair Places Major Boeing Order After Jet Price Truce
The above brief was followed by news that Ireland's Ryanair sealed a multibillion-dollar deal for as many as 300 Boeing jets on Tuesday 9 May, burying the hatchet after an 18-month public feud where prices threatened one of aviation's closest partnerships.
Europe's biggest low-cost carrier said it was placing a firm order for 150 of the largest version of Boeing's narrow-body jet family, known as the 737 MAX 10, with options for another 150.
The larger-than-expected deal delivers a boost to the 737 MAX, Boeing's best-selling jet whose deliveries have been depressed by a two-year safety crisis and post-COVID disruption.
Along with a massive Air India order inked in February for almost 500 jets, it highlights what Ryanair CEO Michael O'Leary termed "a dramatic rebound in orders" for Boeing and European rival Airbus as travel recovers from the pandemic.
It also marks a long-awaited truce after O'Leary broke off talks with Boeing last year and unleashed a barrage of criticism over pricing and delays in delivery of previously ordered jets.
O'Leary, whose sharp wit and hard-nosed demands have made the former accountant one of Europe's best-known business leaders, flew to Washington to celebrate the deal but offered an unusually timid summary following months of tough negotiations.
"I was expecting we would get the same pricing as we had the last time. I've had to eat some humble pie on that," O'Leary told Reuters, adding he was still pleased with the final price, which neither side disclosed.
Industry sources said Ryanair may have paid more than it initially bargained for after holding out for a better deal, but one noted O'Leary took pains to avoid bashing Boeing, which had been anxious for the deal not to be painted as over-generous.
Boeing shares rose more than 1% in midday trade on Tuesday 9 May. Ryanair closed up at 3.6%.
"I have been told to say there was a competitive discount ... although I didn't think (it) was particularly competitive," O'Leary joked to reporters, adding the order had risen by about 100 planes to help bring the two sides together.
Boeing Chief Executive Dave Calhoun countered that no premium was high enough for the jet as the two companies patched up their differences in a relaxed press conference.
Despite concessions on price, O'Leary said the new jets would allow Ryanair to almost double its annual traffic to 300 million passengers by March 2034 from the 168 million flown to end-March this year.
Some of that will come at the expense of rival carriers.
O'LEARY ACCEPTS MODERATELY HIGHER PRICES
Ryanair exclusively uses Boeing 737s for its mainline fleet and is one of Boeing's largest customers with more than 600 planes in its fleet or on order, according to its website.
On Monday, Reuters first reported that Ryanair was close to a major Boeing deal. Earlier on Tuesday, sources said the final deal could involve up to 200-300 jets including options.
Ryanair has long expressed interest in the 230-seat MAX 10, which faces runaway sales of the competing Airbus A321neo used by Ryanair rivals such as Wizz Air WIZZ.L and has yet to be certified. But O'Leary had pledged not to overpay for the 30 extra seats.
Ryanair said the deal was worth $40 billion at list prices, though experts noted that this included options, which are not booked as orders, and typical discounts for firm orders run at more than 50%.
"We've had to accept a modestly higher price," O'Leary said. However, if Ryanair maintains its 94% or near-full load on flights aboard the larger MAX 10 jets, the extra 30 seats will "pay for the aircraft in their entirety," he said on Tuesday.
Industry sources said any price bump could at least partially be offset by compensation for delays, making it hard to measure who conceded most.
O'Leary has also often blasted Boeing over industrial problems. On Tuesday, however, he praised the catch-up effort and said he expects almost all 51 previously ordered jets earmarked for April to arrive by the end of July.
Newly ordered MAX 10s will be delivered from 2027 to 2033.
While Boeing's relief at winning the order was tangible, analysts said Ryanair had lost some advantage in negotiations and early slots as carriers including United Airlines UAL.N placed significant orders for the MAX 10.
O'Leary dismissed this but acknowledged Ryanair would have had to wait until 2028-29 if negotiations had drawn out longer.
One person familiar with the deal said Ryanair could not afford to wait much longer as Indian airlines scoop up hundreds of narrow-body jets, threatening to squeeze Ryanair out of the market for in-demand large models for the rest of the decade.
"Ryanair operates a 737 fleet and is pretty locked in," with Airbus sold out for years and China years away from being able to supply the West, Agency Partners analyst Nick Cunningham said.
Ryanair Wins Court Challenge Against Lufthansa State Bailout
All of the above news was followed by news that Ryanair on Wednesday 10 May won its challenge against Lufthansa's 2020 state bailout, as Europe's second-highest court cited errors in EU competition regulators' decision to approve the German government's rescue package.
Lufthansa has already repaid the aid in full, which could limit any immediate impact of the ruling, although it could have consequences for future state bailouts.
The German airline said it would analyse the ruling and then decide on a further course of action.
The European Commission cleared Lufthansa's €6 billion recapitalisation subject to a ban on dividends, share buybacks and some acquisitions until the state support was paid back.
Lufthansa and several other European airlines received state aid following a protracted travel slump due to the COVID-19 pandemic, all of which were approved by the EU executive subject to conditions.
Ireland's Ryanair and German peer Condor subsequently challenged the EU decision on Lufthansa.
This was one of several legal cases brought by Ryanair against the aid provided to its rivals and cleared by the Commission under easier rules aimed at helping EU government prop up companies hit by the pandemic.
In 2021, the airline lost its case against state aid granted to Air France and Sweden's SAS.
"The General Court annuls the decision of the Commission to approve the recapitalisation of Lufthansa by Germany, amounting to 6 billion euros, in the context of the COVID-19 pandemic," the Luxembourg-based tribunal said.
Judges said the Commission "committed several errors, in particular, by considering that Lufthansa was unable to obtain financing on the markets for the entirety of its needs".
They said the EU competition enforcer also failed to require a mechanism incentivising Lufthansa to buy back Germany’s shareholding as quickly as possible and erred by denying that Lufthansa held significant market power at certain airports.
Additionally, the court said the Commission erred "by accepting various commitments that do not ensure that effective competition on the market is preserved".
Condor welcomed the ruling. Ryanair did not immediately respond to a request for comment.
The Commission can appeal to the Court of the Justice of the European Union, Europe's highest, on points of law.
The joined cases are T-34/21 Ryanair v Commission (Lufthansa; Covid-19) & T-87/21 Condor Flugdienst v Commission (Lufthansa; Covid-19).
The above news was followed by the following update:
UPDATE 4-Lufthansa Suffers Blow As EU Court Backs Ryanair Challenge Against Bailout
Lufthansa suffered a setback on Wednesday 10 May after Europe's second-highest court sided with Ryanair and annulled a European Union competition regulator's decision clearing its state bailout.
The court cited errors in the EU competition regulators' decision to approve the German government's €6 billion rescue package and said they also failed to provide incentives for a quick repayment.
Lufthansa, which said it would decide on a further course of action after analysing the ruling, has already repaid the aid in full, which could limit any immediate impact of the ruling, although it could have consequences for future state bailouts.
Germany's economy ministry said that it was not possible to assess the impact of the judgment, which it planned to examine.
The EU's top competition official, Margrethe Vestager, said "all options" were on the table but did not indicate what her next steps could be after the ruling.
This was one of several legal cases brought by Ryanair against the aid provided to its rivals that it said unfairly skewed competition and cleared by the Commission under easier rules aimed at helping EU governments prop up companies hit by the pandemic.
The court also ruled in Ryanair's favour on Wednesday 10 May against pandemic state aid measures for SAS, saying recapitalisation measures did not include sufficient measures to incentivise the Swedish and Danish governments to exit quickly.
"Today's judgements confirm that the Commission must act as a guardian of the level playing field in air transport and cannot sign-off discriminatory State aid under political pressure by national governments," said a Ryanair spokesperson.
SAS said that the ruling will not affect its flight schedule or bookings, and that it remains under US chapter 11 bankruptcy protection, which it filed for last year.
It also said that the ruling does not change SAS's expectations of getting approval for measures taken since 2020, including the US' participation in the bankruptcy process.
"The General Court has found fault with the EU Commission's decision in one respect, but this does not mean that the States' participation in SAS' recapitalization constituted illegal state aid," the company said in a statement, adding that the EU Commission can reassess the measure, which SAS expects it will.
Lufthansa and several other European airlines received state aid following a protracted travel slump due to the COVID-19 pandemic, all of which were approved by the EU executive subject to conditions.
The Commission can appeal to the Court of the Justice of the European Union, Europe's highest, on points of law.
Read More: Ryanair To Trim Flights In July, August But Passenger Target On Track
News by Reuters, edited by Hospitality Ireland. Click subscribe to sign up for the Hospitality Ireland print edition.
