Ryanair and Boeing have fallen out in public. Here’s why that matters

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So far Boeing is standing up sharply and refusing to meet Ryanair’s price demand, despite the hit it’s taken the past two years to hit sales.

on Tuesday Ryanair (Opinion:) CEO Michael O’Leary called Boeing’s stance on pricing “delusional” and said the aircraft maker’s demand for higher prices on future sales was “unreasonable and inexplicable”.
It is an unusually public dispute between two companies with a long and strong business relationship: Ryanair exclusively flies Boeing 737 jets. And it’s a sign that demand for aircraft in general – and the troubled 737 MAX in particular – has bounced back from the pandemic faster than many thought possible. It is also a strong indicator that higher prices are causing pain not only for consumers but also for businesses.
Part of Ryanair’s business model is based only on flying different versions of the 737, allowing pilots to move uninterrupted Reducing the cost of placing spare parts for different aircraft models between aircraft and at different airports without additional training. Southwest Airlines (LUV), a low-cost US carrier, has long followed such a business model.
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But O’Leary’s statements suggest the airline may be considering making the leap to a 737 competitor.

“Europe’s low-cost carrier Airbus will drive demand for the jets, not Boeing, for the A320 family of aircraft,” O’Leary wrote in a letter to Reuters on Tuesday. Ryanair provided to Granthshala. “If Boeing wants to sell aircraft in Europe, it needs to remain cost competitive and strike a deal with Ryanair.”

The 737 MAX was grounded for 20 months after two fatal crashes that killed 346 people. In December, just weeks after the Federal Aviation Administration approved the aircraft for resumption of passengers, Ryanair announced one of the largest orders for the jet, when it added 75 aircraft to its current order of 135 aircraft. agreed to add. Last summer it took delivery of its first 12 737 MAX jets.

“Ryanair’s board and people are confident that our customers will love these new aircraft. And, above all, our customers will love the low fares that will enable Ryanair to offer these aircraft in 2021 and for the next decade, Irish Airlines said at the time.

Ryanair was also up front that it expected to place an even larger order for the next generation aircraft, the Max 10, once approved by the FAA. Boeing expects to begin deliveries of the Max 10 in 2023.

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“We are already discussing the MAX 10 with Boeing,” Ryanair CFO Neil Sorahan told investors in February. “We’ll definitely be there to order them as soon as they start manufacturing and distributing them.”

But earlier this month Ryanair revealed that negotiations on the 737 MAX 10 had failed, saying that “it is clear that the price gap between the partners cannot be closed and, accordingly, the two sides will continue to discuss these negotiations further.” Haven’t agreed to waste more time.”

is boeing A more optimistic outlook than ours on aircraft pricing,” O’Leary said in the statement, “and we have a disciplined track record of not paying high prices for aircraft.”

Boeing (B. A) Responses to comments have been reserved for now because they come from such an important customer.

“RyanAir is a long-term partner. We value their business and are committed to supporting them,” Boeing said. “At the same time, we continue to be disciplined and make decisions that matter to our customers and our company.”

The aircraft maker has seen a pickup in orders as airlines expect air travel demand to improve. In March, United Airlines announced a massive order for 200 737 MAX jets as well as 70 A321neos from Airbus, the largest single jet order in the airline’s history.

Many experts expect Ryanair and Boeing to put their differences behind and reach a deal on a new Max order soon.

“If pricing for the MAX is holding up, it should strengthen for the A320,” said Richard Aboulafia, aerospace analyst at Teal Group.

Aboulafia said late last year Boeing was offering a hefty discount of about 60% or more on its declared public price for the Max, as it worried about the grounding and the pandemic that has hurt demand for years .

Delivery delays caused by the grounding threatened 737 MAX customers to cancel or cancel earlier orders in order to get a better price. And Boeing had about 100 planes it built during the grounding that it no longer had customers for.

“The price of market frustration is very attractive, but it just isn’t there,” Aboulafia said. “We’ve gone beyond that. There are airline execs who would like to think that when manufacturers lose pricing power, they never get it back. But that’s not the way it works.”

Bank of America aerospace analyst Ron Epstein said it It’s possible that Ryanair could switch to Airbus for future purchases, but that’s not the most likely outcome. He also thinks that Boeing will have to pay the price.

“My guess is Ryanair is playing hardball and eventually Max will get closer to the price they want,” he said. “This is a deal that Boeing doesn’t want to lose and Ryanair knows it.”


Credit : www.cnn.com

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