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Ryanair to tie in new 737 Max order with compensation deal

Ryanair (FR/RYR) has given Boeing a boost with an order for 75 more Boeing 737 Max 8 200s as part of a deal with the planemaker over compensation for the delay of its original Max order.

The deal will bring Ryanair’s 737 Max order up to around 210 units with its first deliveries expected early in 2021.

Ryanair has been negotiating with Boeing, which has lost multiple Max orders, for compensation because of delays to the aircraft caused by the grounding of the type in 2019 after two fatal crashes.

The aircraft has undergone a series of upgrades and rigorous testing ahead of its return to flight.

But now the Max is cleared to fly again in Europe it puts the Irish budget airline in a strong bargaining position.

Ryanair Boeing 737 Max

The list price for each 737 Max 8 200, a high-density version of the Max 8, is around £93m but sources have suggested Ryanair may be getting a discount upwards of 60% as it is in lieu of financial compensation payout.

The deal is certainly badly needed by the Seattle-based plane maker which went from a multi-billion dollar profitable company to one posting a $630+ million dollar loss in just 12 months largely due to the grounding of the 737 Max.

The deal s formally announced today with Ryanair’s Group CEO Michael O’Leary saying: “We are pleased and proud to place this enlarged order with Boeing, who have successfully completed the return to service of the Boeing MAX aircraft. The Boeing MAX is a fabulous aircraft with more seats, more leg room, lower fares, lower fuel consumption, and it sets incredible environmental standards, including 40% less noise and lower CO2 emissions.

We hope to take delivery of at least 50 of these aircraft in 2021, subject to Boeing recovering its manufacturing output to deliver them. For as long as the Covid-19 pandemic depresses air travel, we will use these new aircraft to replace some of our older Boeing NG fleet, which will remain  grounded until pre-Covid demand returns. But as soon as the Covid-19 virus recedes – and it will in 2021 with the rollout of multiple effective vaccines – Ryanair and our partner airports across Europe will – with these environmentally efficient aircraft – rapidly restore flights and schedules, recover lost traffic and help the nations of Europe recover their tourism industry, and get young people back to work across the cities, beaches, and ski resorts of the EU.

We sincerely thank our partners in Boeing, who have worked closely with us over the last 18 months to reschedule aircraft deliveries, to provide fair compensation to reflect those costs which Ryanair has incurred through these delivery delays and to agree this new enlarged aircraft order. We are working closely with Boeing and our senior pilot professionals to assist our regulator EASA to certify these aircraft in Europe, and to complete the training of our pilots and crews across our 3 new Boeing MAX simulators in Dublin and Stansted.

We are extremely grateful to our shareholders who have recently supported a €1.25 billion fundraising, without which we could not have placed this large but very timely aircraft order during a once in a century downturn in the airline industry. We believe our people will enjoy flying these exciting new aircraft, which will, we hope, allow us to recruit/train many thousands of new pilots and cabin crew over the next 5 years. The Board and people of Ryanair are confident that our customers will love these new aircraft, they will enjoy the new interiors, the more generous leg room, the lower fuel consumption and the quieter noise performance, but most of all, they will love the lower fares, which these aircraft will enable Ryanair to offer not just in 2021, but for the next decade, as Ryanair leads a strong recovery of Europe’s aviation and tourism industry out of the 2020 Covid-19 crisis.”

EU Tariffs

As Ryanair is an Irish airline it is also being hit by the new tariffs on aircraft from Boeing that were recently announced.

It means a 15% penalty will be levied on all Boeing aircraft imported into the EU.

Ryanair has already said that it expects Boeing to absorb the cost on aircraft already on order but Boeing is unlikely to do so on new orders.

Ryanair does have a UK subsidiary of course which could allow it to avoid the EU tariffs.

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