Ryanair to Buy Up to $22 Billion Worth of Boeing Jets

Ryanair planes in Belgium. The company has agreed to buy up to 200 more Boeing aircraft. By NICOLA CLARK September 8, 2014

Ryanair said Monday that it had signed a preliminary agreement to buy up to 200 new 737 jets from Boeing in a configuration that allows the European budget carrier to squeeze an additional eight seats into the American plane maker's popular single-aisle airframe.

The agreement, which includes a firm order for 100 of the planes with an option to buy up to 100 more, is valued at more than $22 billion at current list prices. Like most large customers, however, Ryanair would most likely receive the planes at a steep, though undisclosed, discount, industry analysts said.

In a statement, Michael O'Leary, chief executive of Ryanair, called the new high-density 737 a "game changer" that would allow further reductions in the Dublin-based carrier's fares and its operating cost per passenger. Ryanair said it planned to fit the planes with 197 seats, up from the maximum 189 seats on its current fleet of around 300 planes, all of which are Boeing aircraft.

Boeing has dubbed the new single-aisle plane the 737 Max 200 because it can seat up to 200 passengers.

Ryanair is Europe's largest airline by number of passengers, with more than 81 million people traveling each year. It is one of few airlines with an all-Boeing fleet.

The 100 new Boeing planes could enable an expansion of Ryanair's share of the European air travel market to around 20 percent in five years, from around 12 percent today. That rate, if achieved, would mean 100 million passengers a year, and if the order were doubled with the option, 150 million passengers by 2024, the company said.

In 2011, Boeing announced plans for the 737 Max — a version of its best-selling single-aisle plane, the 737, fitted with the next generation in fuel-efficient engines. The company has since received more than 2,200 orders for that model, which seats 189 passengers and is due to enter service in 2017.

The 737 Max competes directly with the A320neo, built by Boeing's European rival, Airbus. The A320neo, due out in 2016, has secured just over 3,200 orders.

In July, Boeing announced plans for a version of the 737 Max that could be configured to seat up to 200 passengers. The A320neo seats 189.

Ryanair has continued a rapid expansion throughout the economic downturn, adding new routes even as higher-cost rivals have retrenched by shedding employees and reducing capacity.

Flagging European economic growth and high fuel costs slowed Ryanair's earnings growth over the past year, but the airline remains the region's most profitable. Profit more than doubled in the three months to June 30 from the same period a year earlier, to 197 million euros, or $255 million. This prompted the company to raise its annual earnings forecast to €620 million to €650 million, up from €523 million in 2013.

Late last year, the 29-year-old carrier — whose brand once drew criticisms for gruff service and other indignities of budget air travel — embarked on an aggressive charm offensive on social media and invested in a raft of improvements including a revamped website, a new mobile booking application and reductions in certain charges like baggage fees.

This month, Ryanair said it would introduce services in October aimed at luring more business travelers, including flexible fares, fast-track security and reserved seating.

The Boeing order on Monday comes nine months after Ryanair announced a deal for 175 of the American plane maker's 189-seat 737-800 — a transaction valued at more than $15 billion at list prices. The first of those planes are due to be shipped to Ryanair later this year, while the remaining deliveries will stretch through 2018.

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