Irish low-cost carrier Ryanair on Thursday placed a firm order for 75 additional Boeing 737 Max airplanes, increasing its order book for the jet to 210. As the first new Max sale since the plane was ungrounded, the deal provides a much-needed boost for the commercial airplane giant as it struggles to revive its fortunes.
In a press conference in Washington, D.C, Ryanair Group CEO Michael O'Leary and Boeing CEO Dave Calhoun extolled the safety of the upgraded Max and their confidence in the the aviation industry's ability to recover from the COVID-19 pandemic — perhaps more quickly than previously anticipated, now that distribution of vaccines is beginning.
"We intend to accelerate the recovery of traffic, tourism and jobs across the continent of Europe in the next five years," O'Leary said. "The Ryanair and Boeing partnership will lead that recovery."
O'Leary said he expects his first Max delivery in the spring, and plans to have 27 in the Ryanair fleet by next summer and 75 a year later. He showed a chart that anticipates all 210 Maxes will be in service with Ryanair by the summer of 2025, making up 35% of its total fleet.
"We need more aircraft in Ryanair if we are going to lead that recovery in Europe," O'Leary said. "This is a great aircraft. We're proud to buy them. We're proud to fly them."
Addressing head-on the impact of the two deadly Max crashes that killed 346 passengers and caused the jet to be grounded for more than 20 months, O'Leary praised the efforts of air safety regulators in the U.S., Europe, Canada and Brazil to intensively review the airplane's systems.
"This is the most scrutinized, most audited aircraft in history," he said. "I cannot tell you how confident we are in the safety of this aircraft."
Boeing chief Executive Dave Calhoun said the company remains proud of the Max and that Ryanair's order demonstrates "belief and faith in the future of our industry."
According to standard pricing estimates by aircraft valuation firm Avitas, 75 Maxes might cost up to $3.5 billion in this year's depressed market. However, the financial terms were not disclosed. For such a validating order following the Max's ungrounding, Boeing must have given O'Leary a more deeply discounted deal.
Boeing's sales team has been offering bargains to move more than 60 Max aircraft already built for buyers who have backed out. And O'Leary famously times his orders to negotiate aggressively low pricing.
Calhoun said that won't harm Boeing's profit on the Max program.
"I'm not concerned about price discounts as incentives to move airplanes," he said, adding that Boeing will be patient in negotiating deals because it believes strongly that demand will rebound.
However low Ryanair's price, the sale has important psychological value after the grounding. Stan Deal, chief executive of Boeing Commercial Airplanes, said "this order builds momentum going into next year."
If further airlines step up behind Ryanair to buy the plane for a future return to more normal levels of air travel, the public may gradually accept what the U.S., European and Brazilian aviation regulators have just recently attested: that the Max is safe to fly.
Boeing has to deliver more than 450 jets built after the grounding and parked since they rolled out of the factory. According to an October analysis by trade magazine Aviation Week, 62 of those planes were fulfilling orders subsequently canceled by their original customers, and had not yet been picked up by another.
Since the grounding, Boeing has booked some small Max orders totaling 42 aircraft, likely the result of customers picking up canceled jets cheaply.
Through October, Boeing this year has canceled orders for 448 Maxes and removed a further 595 from the Max backlog as too dubious to count, for a total order reduction this year of 1,043 MaxS.
Boeing must hope that the ungrounding will stanch the bleeding of Max orders and that the Ryanair deal marks a turnaround so that the backlog will now grow again.
Calhoun said he now expects "a more robust order book, more coming in and than going out."
Planning for expansion in a downturn
Ryanair already had 135 Maxes on order, 100 of which are a special high-density version of the Max 8. While that model typically seats a maximum of 189 passengers, the Ryanair variant — the Max-8200 — is configured to seat 197 passengers.
Ryanair also has ordered Maxes for its Polish subsidiary, Buzz Air.
Maxes painted in the liveries of Ryanair and Buzz have been parked for months beside the runway adjacent to its 737 assembly plant in Renton, indicating they are in line for delivery sooner rather than later.
As currently parked Maxes in Renton, Everett and at Boeing Field in Seattle are delivered, more than 200 more Maxes parked for longer-term storage at Moses Lake in eastern Washington will be flown in batches to Seattle for delivery.
During the current pandemic-driven steep drop-off in air travel, Ryanair is one of a few financially strong airlines seeking to gain market share over rivals by planning an expansion of its aircraft fleet as soon as the current downturn eases.
In the 12 months prior to the Max grounding in March 2019, Ryanair made $1.1 billion in profit. In the year after, it still managed a profit of $784 million. The airline raised $1.25 billion from bond holders in September to fund the planned order.
In the airline's annual report in April, O'Leary wrote that "the Covid-19 crisis will cause dramatic unemployment and recession across Europe, but we expect this will create opportunities for Ryanair ... to grow our network, to expand our fleet."
In the 12 months before the pandemic shut down the industry, Ryanair carried 149 million passengers. In this year of the pandemic, it expects to carry only 35 million between March 2020 and March 2021. However, it's anticipating strong growth after that.
In the U.S., Alaska and Southwest have similar ambitions to grow as travel recovers.
Last month, Alaska announced it would add 13 leased Maxes to the 32 Maxes it previously ordered directly from Boeing. And Boeing is hoping for an additional Max order from Southwest to add to the 281 it previously ordered.
The families of those killed in the two Max disasters remain unconvinced that the airplane is safe and expressed outrage at Ryanair's vote of confidence.
Naoise Ryan, wife of Mick Ryan, an Irishman who died in the March 2020 Ethiopian Airlines Flight 302 crash, called the order "an endorsement of Boeing's disregard of safety and human life" and criticized Ryanair for being "prepared to gamble with people's lives in order to sell cheap flights on 'bargain-binned' planes."
Boeing's Calhoun at the press conference reiterated that the company will never forget the 346 lives lost.
"We have reinstated, reinvigorated everything that has anything to do with safety across our company," he said.
And he said that the enormous impact of the COVID-19 pandemic, which has led to tens of thousands of layoffs and a shrinking of the company, will have a "silver lining": a redefining of Boeing.
"I think we come out of here leaner, faster, better, and most importantly, safer," Calhoun said.
