Ryanair makes big order for 737 MAX jets that can carry 200
The low-cost Irish airline will take a new version of the 737 MAX, with an extra door and no food-prep galleys, configured to fit up to 200 passengers. The deal is valued at $22 billion at list prices but airlines get large discounts on big orders so the real price is likely about half that.
The new 737 MAX 200
Seats: Up to 200 passengers, versus 737-8’s maximum of 189
Ryanair’s plan: Only 197 passengers, since at 200 another flight attendant is required
Left out: No galleys at front and back, so no food service
Added: Another exit door
Source: Boeing, Ryanair
Though domestic flying is already a trial by constriction, Boeing’s latest high-density version of its workhorse 737 short-haul aircraft squeezes in up to 11 more seats than the current model in an all-economy, no-frills cabin.
Don’t expect any food on this airplane. To create space for up to 200 of the latest “slimline” seats, there are no galleys.
On Monday, Europe’s leading low-cost carrier, Ryanair — an airline with a well-earned reputation for poor customer service — became the launch customer for the new 737 MAX 200 with a commitment to order up to 200 of the new planes.
At a news conference in New York, Ryanair’s brash chief executive, Michael O’Leary, sporting a Seattle Seahawks Earl Thomas shirt under a pilot’s leather jacket, insisted that the new plane — thanks to those missing galleys and narrower seats — will have more leg room than his current jets.
And he touted the fact the plane comes standard with a “Boeing Sky Interior,” a more visually appealing cabin with taller ceilings, better lighting and stow bins that are tucked away above passengers’ heads.
Longtime analyst Michael E. Levine, a former airline executive now on the New York University Law School faculty, doesn’t buy the notion that any desire to increase comfort is driving the concept.
Levine said airlines will use Boeing’s new plane to attract that “segment of the market that is willing to put up with anything to pay the lowest possible fare.”
Though Ryanair in the past year has been trying to diversify its passenger base by attracting business passengers, Levine said that in buying the 737 MAX 200, the airline is signaling a portion of its future fleet will “be dedicated as before to minimum service at minimum price.”
“This airplane is a tool to do that,” said Levine.
But even if passengers don’t like the ride, low-fare airlines will be thrilled at the economics.
In New York, O’Leary said he felt like a child unwrapping a Christmas present and getting just what he’d asked for.
“We’ve been pushing Boeing for the last 10 years to try to get close to 200 seats,” O’Leary said. “Finally we are getting the aircraft we wanted.”
The Ryanair deal is valued at $22 billion at list prices, though with a typical large discount on a big order, the real price is likely about half that.
The new version of the 737, which was announced at the Farnborough Air Show in July, comes with an extra door just rear of the wing, which removes a regulatory limit on the plane’s capacity.
With the extra door allowing passengers to exit faster in an emergency, the plane is technically allowed to carry 200 passengers — which O’Leary said is the “sweet spot” for short-haul travel — and so is called the 737 MAX 200.
Ryanair will configure the cabin with just 197 passengers, to avoid having to add another flight attendant.
The current 737-8 has a maximum capacity of 189 seats. O’Leary said the eight extra seats “will generate about $1 million annually per aircraft in additional revenue ... almost straight to the bottom line.”
Combined with the MAX’s fuel-efficient engines, that will make the new MAX 200 model 20 percent more cost efficient per seat over current 737s.
The rival Airbus plane of this size, the A320, carries only 180 passengers, though the European jet-maker has said it’s studying how to increase capacity to 189 passengers.
But with this new, high-density MAX 200, “Boeing has leapfrogged them again,” O’Leary said.
O’Leary said he paid a “modest premium” for the higher-density version compared with pricing for his current aircraft.
But Ryanair bought its existing fleet with especially large discounts: A 2005 financial filing by the airline indicated it had paid about $29 million for jets with a list price then of around $65 million.
O’Leary said the new order is in addition to the 175 current model 737s he ordered at the Paris Air Show in June 2013, with five more tacked on earlier this year.
Receiving 380 737s in the next 10 years, along with retirement of some older planes, means Ryanair’s fleet will swell from 300 to 520 Boeing aircraft by the end of 2023, he said.
O’Leary will visit Seattle on Tuesday to take the first of the jets ordered in Paris. The Irish airline’s position as a premier Boeing customer is now secured — it is set to take an average of more than three jets out of Renton every month for the next decade.
The deal announced Monday is a firm order for 100 of the new higher-density 737, with options to buy 100 more at similar pricing.
O’Leary insisted that Ryanair has always taken all the options it has ever agreed to.
“I confidently believe we’ll take all 200,” he said.
At the launch, O’Leary outlined a bold plan to use that fleet growth to take more market share in Europe, increasing the number of passengers flown annually from 82 million today to 150 million 10 years from now.
He said Ryanair, which today typically flies into smaller regional airports some distance from Europe’s major city centers, will expand into more primary airports and directly compete there with flag carriers such as Air France, British Airways and Lufthansa.
O’Leary took jabs at Europe’s “many old failing flag carriers,” which he said are cutting capacity on short-haul routes because of competition from Ryanair and other low-cost carriers.
“We intend to use these brilliant new aircraft to expand into those markets,” he said.
He promised “a new price war in Europe, which, like all the old price wars, Ryanair will win.”
Ryanair’s current average fare is $60.
Boeing Commercial Airplanes CEO Ray Conner said in New York that the jet-maker projects fully 35 percent of all single-aisle jet sales in the future going to low-cost carriers.
O’Leary predicted that with Ryanair’s order leading the way, Boeing will soon have “a flood” of low-cost airlines lining up to buy the new jet.
Scott Hamilton, Issaquah-based aviation analyst with Leeham.net, cautioned that many factors come into play in jet-sales campaigns and that Airbus may choose to undercut Boeing with aggressive price reductions on its A320.
Still, he said, the 737 MAX 200 could potentially sell well to low-cost carriers in high-density markets such as Asia.
“If you are looking purely at the revenue opportunity, eight more seats ... airlines like that if they can fill them,” said Hamilton. “All other things being equal, it should give Boeing an advantage.”
At Monday’s news conference, O’Leary reiterated his wish to one day start a separate low-cost transatlantic unit, likely flying Boeing 787 Dreamliners.
However, he said this cannot happen for some years, as he would need 30 to 40 twin-aisle jets for such an operation and for now that number is not available at bargain prices.
“Availability isn’t there for another four or five years,” O’Leary said, adding that he’ll seek to secure such a long-haul fleet “opportunistically” and that to make it more likely, he’s urging Boeing to “crank up production” on the 787.
After the news conference closed, Reuters reported, Conner said Boeing has no plan to increase the 787 production rate above the 14 jets per month level already set for the end of this decade.
However, the Ryanair deal and other blockbuster sales in the single-aisle jet market are creating “incredible pressure to go higher” than the current planned peak of 47 airplanes per month in 2017, Conner said.
Boeing currently produces 42 jets a month at its 737 factory in Renton.
“We still see tremendous demand across the board, way beyond 47 a month,” Conner told Reuters.
In January, Kent Fisher, Boeing vice president of supplier management, told suppliers that Boeing may increase the 737 rate to 52 jets per month “later in the decade.”
Dominic Gates: (206) 464-2963 or email@example.com