Ryanair eyes ‘rebound’ with new 737-Max deal

Ryanair group CEO Michael O'Leary said the airline's purchase of 75 more Boeing 737-Max planes will help the airline achieve 'very strong growth' over the next five years.

Michael O’Leary has predicted a “very strong rebound” for Ryanair and the wider airline industry next year, after confirming the airline is buying significantly more of Boeing’s controversial 737-Max planes than previously planned.

Ryanair has agreed to pay Boeing around an additional $7bn (€5.8bn) for 75 more 737-Max planes and intends to fast-track their delivery to begin next spring. Ryanair already had 135 Max planes ordered. Over the next five years it will now take delivery of 210 in total, increasing the value of the total deal to over $22bn. The order will boost Ryanair’s total fleet of planes from 450 to 600.

The confirmation of the deal boosted Ryanair’s shares (already up 19% in the last 12 months) by over 3%.

Mr O’Leary said Ryanair hopes to have 25 to 30 of the new planes by next summer to help lead the company into a phase of "five years of very strong growth".

He said Ryanair won “a very modest” price discount on the new order and received some compensation from Boeing due to delivery delays.

Mr O’Leary also said he doesn’t expect any loss of passenger confidence in the Max.

“This is the most scrutinised, most audited aircraft in history. It’s also going to be one of the safest aircraft that’s ever been delivered,” he said.

The 737-Max, which Boeing now calls the Max-8200, was grounded in March of last year after two fatal crashes and was only cleared to fly again last month.

“We’ve got to look forward with great confidence. Vaccines are coming. There will be a very strong recovery and we [Ryanair] need more aircraft if we’re going to lead that recovery in Europe,” Mr O’Leary said.

He said the new planes will give Ryanair a unique opportunity to offer people more seats at lower prices. He said the plane will boost seat capacity and lower fuel costs per seat by 16%, and give Ryanair the youngest plane fleet in Europe.

Ryanair carried 149 million passengers last year, but that figure is likely to be down to just 35 million this year due to the Covid shutdown. However, Mr O’Leary said passenger numbers could jump back to between 95 million and 130 million, depending on vaccines, by next year and reach 200 million by 2026.

“I think we’re going to see a very strong rebound in Boeing, in Ryanair, in our industry and especially in Europe,” he said.

Meanwhile, the world’s largest holiday company TUI has secured a third bailout, striking a deal with the German government, private investors and banks for an extra €1.8bn to help ride out the Covid travel slump.

Elsewhere, Norwegian Air has proposed to convert debt to equity, offload planes and sell new shares in an attempt to survive the Covid crisis, which has brought the company to its knees.

As part of the plan, Norwegian, which recently applied for bankruptcy protection in Ireland, aims to raise up to €375m from the sale of new shares or hybrid instruments, it said.

It will also seek to only pay lessors for the use of the aircraft when they are actually in use, by the hour, until 2022.

-additional reporting Reuters