‘Boeing’s problems become Ryanair’s’: Airline’s battle to maintain low prices

Ryanair needs to stick with Boeing despite recent troubles to maintain its ultra low-cost model, an aviation analyst has revealed.

Michael O’ Leary, the airline’s CEO, said last month he was “very disappointed” that the Irish budget airline will receive only 40 of the 57 aircraft it had on order from Boeing in time for the summer schedule.

It has meant the firm has had to reduce the frequency of flights on some of its existing routes for this summer, a peak time of year for the business.

Ryanair said the changes will reduce its traffic for the 2024-25 financial year from 205 million passengers to between 198 and 200 million, a net increase on the previous year but lower than it had hoped.

Nonetheless Mr O’Leary, famed for his outspoken approach, has chosen to back Boeing despite the delayed delivery and a series of issues linked to Boeing’s aircraft, saying: “Boeing continues to have Ryanair’s wholehearted support as they work through these temporary challenges.”

Ryanair chief executive Michael O’Leary has been supportive of Boeing in recent statements (Photo: Evelyn Hockstein/ Reuters)

Bernard Lavelle, principal aviation consultant at BL Aviation Consulting, said he expects Ryanair’s loyalty to Boeing to remain rather than switching to Airbus because it means the airline can maintain its low-cost model.

He told i: “I suspect Michael O’Leary is probably thinking this is the right time to be supportive because it is how they are going to get aircraft delivered.

Read Next

Boeing tries to speed up deliveries as Ryanair cuts summer flights

World

Boeing tries to speed up deliveries as Ryanair cuts summer flights

Read More

“They are all about Boeing, it’s part of their ultra low-cost model.

“Moving to a different supplier would move them away from that model.

“I think that’s the reason why they are very, very unlikely to go to Airbus.”

Mr Lavelle said keeping to a single aircraft supplier means pilots need only be trained to fly the Boeing aircraft, a new supplier would require more training.

Also, airlines must maintain a certain level of spare parts for their aeroplanes at any given time. Maintaining that for just one make of aircraft is cheaper.

John Strickland, aviation analyst and director of JLS Consulting, agrees that Ryanair will not want to move away from its relationship with Boeing, despite the delivery delays.

He told i: “Ryanair will certainly seek compensation but this does not mean they will seek to end their relationship with Boeing.

“A large Boeing fleet is an integral part of their growth strategy.”

Ryanair said last month it was only expecting to receive 40 of the 57 Boeing aircraft it had ordered by the end of June this year (Photo: Peter Cziborra/Reuters)

Despite Ryanair’s loyalty to Boeing, Mr Lavelle believes Mr O’Leary is likely to have agreed penalty payments from Boeing to make up for any losses the airline may incur.

“There will be some sort of penalty payment within the contract which relates to late delivery,” he said. “Michael O’Leary will ensure there are penalty payments in the contract.”

There could be a break clause in the contract, but he noted such a clause suggests they have somewhere else to go.

“The issue here is there are only two suppliers in that market,” Mr Lavelle said, “It’s not ideal but it is what it is.”

Airbus is the only other supplier of the single aisle aircraft Ryanair uses.

“It would be a massive move for Ryanair and Airbus couldn’t provide what they need because they have a massive backlog [of orders].

“There will be a review clause between Ryanair and Boeing where they review things such as delays to deliveries and quality. What Ryanair wants is good quality aircraft delivered on time.”

He says Boeing will want to keep such a large customer on side. “Boeing’s problems become Ryanair’s problems,” he said. “They are going to have to try and sort this thing out together.”

Ultimately, he believes the planemaker will be able to do this. “Boeing do a huge amount of military work for the US, they are too big to fail,” he said. “They will sort out their problems.”

There has been some fruit from this relationship already. Mr O’Leary announced on Wednesday that Boeing had taken steps to accelerate delivery of the outstanding aircraft ordered with an additional two or three possibly being delivered before the end of June.

Mr Lavelle said: “If they are getting three aircraft earlier, it means other airlines are now getting three later.”

Ryanair’s strategy will now be to “get their money through penalty payments” and “keep the pressure on Boeing to get the aircraft”, he says.

“He will be keeping a very close eye on the new management at Boeing so they can supply more aircraft to them,” he said. “I don’t see him doing anything in terms of major changes.”

He added: “All Michael O’Leary cares about is the delivery of his aircraft, he will just be keeping the pressure on.

“He is probably saying right we will take the penalty payments and make this summer work but he won’t be so happy if there’s a repeat of that next year.”

Ryanair and Boeing have been approached by i for comment.

Airfares are likely to go up due to the aircraft shortage and consistently high demand, but not necessarily enough to recoup financial losses. Ryanair said last month the Boeing delivery delay would lead to “more constrained capacity and slightly higher air fares” this summer.

Boeing has faced a series of issues with its aircraft. A mid-air cabin blow-out in January on an Alaska Airlines aircraft resulted in the grounding of this type of Boeing 737 Max 9 by the US Federal Aviation Administration (FAA), the European Union Aviation Safety Agency and the UK Civil Aviation Authority while safety inspections were carried out.

The FAA’s six-week audit of Boeing and Spirit AeroSystems, prompted by the incident, found “multiple instances where the companies allegedly failed to comply with manufacturing quality control requirements” – leading to the FAA halting production expansion of the Boeing 737 Max.

This meant Boeing has been unable to meet delivery schedules on orders for new aircraft from airlines including Ryanair.