Source: Financial Times, February 3, 2009
Ryanair talks jets
Ryanair, Europe's biggest low-cost airline, is in early talks with Boeing and Airbus about an order for 300-400 short-haul jets, one of the biggest purchases of new aircraft.
Michael Cawley, deputy chief executive and chief operating officer for Ryanair, said he expected the group to place the order within 24 months to take advantage of the weakening commercial aerospace market.
The Irish carrier is seeking to repeat its coup of six years ago, when it ordered 100 aircraft and another 50 options in January 2002, close to the bottom of the last aviation recession.
It was the biggest order Boeing had received for its 737 jets. Ryanair secured one of the largest discounts agreed by the US aircraft maker, which was desperate for orders. Both Boeing and Airbus have said they expect orders to plunge this year to about a quarter of the peak combined industry level of more than 2,800 orders in 2007.
Ryanair has a single type fleet of 181 Boeing 737-800s. That is due to rise to 292 by March 2012 based on existing firm orders. It recently exercised options for 13 more jets for delivery in 2011 and has 10 options remaining.
It is halfway through a plan to double its fleet and passenger numbers between 2007 and 2012. Passenger volumes are scheduled to grow from 43m in the year to March 2007 to 87m in the year to March 2012, when Ryanair will have become the biggest short-haul carrier in Europe.
The potential order will trigger a fierce contest between Boeing and Airbus.
Mr Cawley said that, given the airline's size, the group would be happy to move to a mixed Airbus/Boeing fleet.
'We see no cost handicaps that cannot be overcome,' he said. 'We would only order Airbus, if it made a big difference to our cost base.'
In the last downturn, EasyJet wrung big price concessions out of Airbus to switch from an all-Boeing fleet.
EasyJet, the leading UK low-cost airline, is seeking to slow its growth and has clauses in its Airbus contract to defer half its deliveries up to two years.
It is under heavy pressure in particular from its founder and leading shareholder Sir Stelios Haji-Ioannou to conserve cash and restrict growth.
What arguments would you give for Ryanair's upbeat attitude to expansion?
What reaction would you suspect from Airbus given Boeing's position in the aircraft industry?
The low-cost carrier remains confident as its rivals retrench
Michael O'Leary is keeping the throttle wide open despite the deepening recession.
The Ryanair chief executive is sticking to his tried and tested formula of making a big grab for market share in a downturn, while EasyJet, his main low-cost airline rival in Europe, is becoming ever more cautious about fleet expansion.
As his competitors retrench – or go out of business altogether – Mr O'Leary believes Ryanair's unchallenged position as the lowest cost, lowest fares operator in Europe will allow it to continue to grow.
Michael Cawley, Ryanair's deputy chief executive and chief operating officer, said yesterday the airline was in early talks with Boeing and Airbus about a big order for 300-400 more aircraft to be placed in the next 18-24 months. Ryanair's current delivery stream ends in 2012. The airline is adamant that there is still huge scope for expansion, as new markets open in Europe and rivals are shouldered aside. Mr Cawley said the group was expecting continued strong growth in continental Europe in coming years - particularly in Italy, Spain and Scandinavia, where local airlines are being forced to consolidate and retrench. Ryanair has established 31 operating bases in Europe to date.
The airline said yesterday it had fallen into loss in the three months from October to December, largely due to a surge in its fuel costs in that period.
He added that Ryanair would return to 'substantial profitability' in the financial year to March 2010, thanks to the lower oil price and despite a forecast 10 per cent drop in fares.
It was 'poised for substantial traffic and profit growth' in the coming year as the recession forced 'millions of passengers to focus on price', he said.
Passenger numbers in the quarter rose by 13 per cent, from 12.4m to 14m, while turnover increased by 6 per cent, from €569.4m to €604.5m.
The group is gaining an increasing share of its turnover from ancillary revenues - including commission earnings on hotel, car hire and travel insurance bookings - which accounted for 22 per cent of sales in the third quarter, up from a year ago. Ancillary revenues rose by 19 per cent to €132m.
Ryanair said it planned to launch in-flight use of mobile phones at the end of February on 20 Dublin-based aircraft, in a trial that should be extended to about 40 aircraft by the end of the summer.
Initial revenues would be small, but the airline expected in-flight communications to become a 'strong source' of growth in coming years.
Source: Financial Times, February 5, 2009
Group wary of bid contest with Boeing
Order for 300-400 new aircraft at stake
Airbus has snubbed an effort by Ryanair, the low-cost airline, to draw it into a bidding contest against Boeing for the carrier's next multibillion dollar order for several hundred short-haul jets.
The European aircraft maker is unwilling to contemplate the scale of discounts being sought by Ryanair, which has established a reputation as one of the most aggressive negotiators of low-cost supply deals in the industry.
Airbus's reluctance to enter the preliminary bidding for the Ryanair order is highly unusual given traditional fierce competition between the duopoly manufacturers of big commercial jets above 100 seats.
The two groups vie for annual bragging rights as the leading commercial aircraft maker, a position held by Airbus.
The order volumes from Ryanair, if not the profits, represent a prize given that the Irish carrier is poised to become Europe's biggest short-haul airline by passenger numbers.
Michael O'Leary, Ryanair chief executive, and senior colleagues have visited Airbus headquarters in Toulouse to outline their plans, but the European group, the commercial aircraft division of EADS, has told the airline it is not interested at the prices Ryanair is seeking.
John Leahy, Airbus chief commercial officer, said: 'We are not in discussions with Ryanair about aircraft. That is on the record. We don't have plans to enter a sales campaign with Ryanair, which would be very expensive and very time-consuming.'
The Irish carrier is seeking to repeat its coup of six years ago, when it placed its previous biggest order for 100 aircraft and a further 50 options in January 2002, close to the bottom of the last aviation recession.
It was the biggest order Boeing had received for its 737 jets, and Ryanair secured one of the largest discounts agreed by the US aircraft maker, which was then desperate for new orders. Boeing and Airbus have said they expect new orders to fall this year to roughly a quarter of the peak combined industry level of more than 2,800 new orders won in 2007.
Ryanair has single type fleet of 181 Boeing 737-800s. This is due to rise to 292 by March 2012, based on its existing firm orders.
It is looking to secure a delivery stream through the next decade to replace older jets and to allow for expansion.
Airbus is reluctant to enter sales campaigns that have little prospect of success.
Subsections 2.3 and 2.4