Boeing wins landmark order from Ryanair for 300 737 Max 10 jets

By Siddharth Philip and Julie Johnsson

Boeing Co. secured a landmark order from one of its most important customers, with Ryanair Holdings Plc agreeing to purchase as many as 300 of the company’s largest 737 Max aircraft in a bet on the post-pandemic travel recovery. 

The order, made up of 150 firm purchases and the same number of options, has a list value of $40 billion, Boeing and Ryanair said in a statement Tuesday, though major deals typically command big discounts. Boeing shares jumped as much as 3.7% in New York, while Ryanair, Europe’s largest discount carrier, advanced 2.1% in Dublin.

The huge commitment to Boeing’s largest 737 variant marks an important endorsement from one of the US manufacturer’s most loyal customers and highlights how carriers are willing to splurge on fleet upgrades again as air travel rebounds. Ryanair said the deal —  the largest order ever placed by an Irish company for US manufactured goods — was more expensive than its current crop of 737 deliveries. 

“We paid more per seat but we’re still incredibly happy with the deal we’ve done,” Chief Executive Officer Michael O’Leary said at a news conference. “We think the extra seats give us the revenue-earning potential.”

Deliveries will start in 2027 and run through 2033. Ryanair said discussions surrounding the purchase started in January, and half the order is earmarked for replacement of older 737NG models while the other half is reserved for growth.

By 2034, Ryanair will expand to carrying 300 million passengers, targeting market share in Europe of about 30%, O’Leary said. The airline will have about 550 aircraft by the middle of this year and increase that number to 800 over the next decade, he said.

Biggest Buyer
 

Ryanair is Boeing’s biggest buyer in Europe, having built its entire fleet of short-haul aircraft around the workhorse 737. O’Leary said in late March that the airline had resumed talks with Boeing more aircraft.

The Covid-era shutdown of some European carriers and scaling back at others has created openings for Ryanair. O’Leary has cited growth in Italy, where Alitalia was succeeded by the smaller ITA, in Portugal, where state-ward TAP is now up for sale, and markets in Ireland and Spain, where incumbents were slow to restore capacity, as providing Ryanair with ample opportunity for growth.

The budget airline is among companies that have predicted a summer booking surge, particularly on shorter-haul routes to sunny destinations like Spain or Italy. British-Airways parent IAG SA raised its forecast for the year last week.

Ryanair joins other airlines expanding their fleets, having repaired their balance sheets and repaid government loans. Deutsche Lufthansa AG said in March that it would buy 22 new widebody aircraft from Airbus SE and Boeing in an order valued at $7.5 billion at list price. A month earlier, Air India Ltd. announced a 470-plane order with the two manufacturers in the largest purchase in commercial aviation history to date.

Some Delays
 

The 737 Max 10 hasn’t been without hiccups. Boeing now expects the US Federal Aviation Administration to begin certification flights for the long-delayed aircraft this year, with the first deliveries expected in 2024. In December, US lawmakers struck a deal to exempt still uncertified Max 7 and 10 models from a a new cockpit requirement that would have taken effect at the start of 2023 and potentially set back deliveries further.

Boeing CEO David Calhoun said at the presentation that he still expects certification of the aircraft in 2024.

Airlines that have committed to the 737 Max 10 include Delta Air Lines Inc., United Airlines Holdings Inc. and IAG. The aircraft competes with Airbus’s bestselling A321neo, as carriers migrate toward the biggest versions of the most widely flown narrow-body jets.

Along with legacy carriers, Ryanair competes with Budapest-based Wizz Air Holdings Plc, which is ramping up operations in its Eastern Europe stronghold, as well as expanding west. The carrier operates the bigger 239-seat Airbus A321neo.

New Phase
 

“It was axiomatic that Ryanair would order the higher-gauge Boeing plane, as the only aircraft that enables it to stand toe-to-toe with Wizz Air on unit cost,” wrote Alex Irving, an analyst at Bernstein, in a research note. “This is the turning point” as growth slows and the Irish carrier focuses more on cash generation.

Ryanair previously topped up its order for the 737 Max 8 version with a special high-density configuration to a total of 210 aircraft. It has already received about 100 of the airliner. The airline has continuously bought larger aircraft to expand capacity, going from the 737-800 with 189 seats to the Max 200 with 197 to the Max 10, which will have room for 230.

With the Max 200, O’Leary claimed in January that there’s a widening cost gap between Ryanair and other European carriers. The even-larger Max 10 now gives him another weapon.

“You keep building them, and we’ll keep buying them,” O’Leary said.