O Learys relationship with Boeing turning sour.

Run_to_da_hills

Ryanair has said it will bring forward a new long-term strategy for the airline after negotiations with Boeing for an order of up to 200 new planes broke down. Looks like he cannot get them at the rate he hoped to also it looks like the recession is finally getting the better of him.

http://www.irishtimes.com/newspaper/breaking/2009/1218/breaking7.htm

seamus

I think it's just O'Leary playing hardball. Whatever way you look at it, some idiot at Boeing has managed to lose them $10,000,000,000 (A 737-800 typically costs around $50m) in revenue.

Although Boeing have Ryanair somewhat over a barrell because of O'Leary's insistence on using one type of aircraft to keeps costs down, Ryanair generates sufficient profits for their shareholders that they can easily hold off serious expansion for longer than Boeing can do without the orders.

I'd say it's more publicity from MOL and Boeing will be back within the week with a better offer.

FlutterinBantam

I would agree with that Seamus.

Dacian

Hard to know what actually was asked for and/or refused.

The demands of FR are similar to what they did to SNN and MAN. According to the article Boeing refused to incorporate some terms of the exisitng contract into the new one. In 2002 FR had Boeing in a pickle,they agreed to very unfavourable prices (for them) in order to get the huge order. Now they are not as desperate but MoL wants the old conditions.

Maybe FR wanted particular slots in the delivery queue and Boeing wasn't willing to push back orders for other airlines. Apparently Boeing has 2-3 years of orders so the current situation is not at all like 2002.

And while the list price of 200 B738 should be $10Bn, what was the price FR got? Remember that MoL boasted that the discount they got in 2002 could be compared to rape. Or words to that effect.

Fajitas!

He's done this before, it just wasn't publicised.

He's playing ball. Or, waiting for Boeing to play ball at least.

bladeruner

seamus wrote: »

I think it's just O'Leary playing hardball. Whatever way you look at it, some idiot at Boeing has managed to lose them $10,000,000,000 (A 737-800 typically costs around $50m) in revenue.

Although Boeing have Ryanair somewhat over a barrell because of O'Leary's insistence on using one type of aircraft to keeps costs down, Ryanair generates sufficient profits for their shareholders that they can easily hold off serious expansion for longer than Boeing can do without the orders.

I'd say it's more publicity from MOL and Boeing will be back within the week with a better offer.

I dont agree.
O leary is already wondering where to put all the aircraft he has , let alone the next 100 he has already ordered without wondering where he would put another 200...
a base on the moon perhaps?
I reckon he was looking to defer his current order and was looking to order more in te future (perhaps) if boeing could dig him out of the hole he is currently in .

just my 2 cents

Dacian

bladeruner wrote: »

I reckon he was looking to defer his current order and was looking to order more in te future (perhaps) if boeing could dig him out of the hole he is currently in.

About 8-12 months ago I heard a rumour from a guy in the industry (works with Flight International,but not directly employed by them)

FR were selling off their older B738s,the buyer then had to refit things like window blinds,reclining seats et al to bring them back to industry standard. Well apparently Boeing were matching the price with a new B738 in an attempt to hurt FR. The less B738s FR could sell off the more chance there was of them delaying deliveries and paying penalties. However its seems that the machinists strike in Boeing helped FR by stopping the deliveries for a short time.

NUTLEY BOY

Sounds like a classical negotiation strategy. i.e. dangle a deal and walk away.

pclancy

So they cant expand quickly enough to use all these airplanes eh....Why don't they use some of that aircraft capacity to expand beyond Europe? There's plenty of room in the fast developing Indian and Chinese low-cost markets, plenty of room in the asia/pacific regions for growth too. Hell he could even cross the Atlantic and have a stab at Southwest

God almighty, i wish the reverse would happen i.e. South West comes to Europe and beats Ryanair to a pulp. All the savings, none of the nastiness.

Mailman

Negotiating Tactic:
O'Leary should start leasing or buying a handful of ATR72s.
He would be able to deploy them on some of Ryanair's quieter routes at a near guaranteed 100% occupancy so they'll pay for themselves.
Boeing think that their 737s are the only game in town and that is right because Ryanair aren't going to defect to A320s.

By deploying a couple of ATR72s O'Leary can show he has 20Billion to spend and it doesn't necessarily have to be spent with Boeing.
Buying a couple of ATR72s gives O'Leary an excellent negotiating position with no cost to him.
He can say to Boeing we can still continue to grow organically without you.
Why should we bother busting our gut to fill an 178 seater plane at heavily discounted fares when we can fill 72 or 78 seats with no effort at a higher fare and lower operating and capital cost.

Mailman

pclancy wrote: »

Why don't they use some of that aircraft capacity to expand beyond Europe? There's plenty of room in the fast developing Indian and Chinese low-cost markets

There is no room in China or India for a Westerner.
Ryanair is the product of a liberalised free market.
There is no entry to China or India except by being either Mr. Tata's or The Communist party's bitch.
I direct you to VW's recent purchase of Suzuki. VW have no interest in Suzuki Japan, they just want to get to Suzuki Maruti to give VW access to the Indian market. Is that coming at a problem sideways or what?

pclancy

Indeed. Well they're going to have to come up with some way better of growing in this climate.

DublinWriter

Well, that's Corporate Karma for ya.

O'Leary bent Boeing over his desk immediately post-9/11 and surprise surprise now they want to play 'Daddy'.

Unfortunately O'Leary bases most of his supplier relationships on an adversarial level, great if you're running a corner shop but you don't need to be a Harvard MBA to know that this isn't a viable long term approach.

Run_to_da_hills

He gets a slating in the Sindo.

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Wonder if he would consider the Embraer 195 or Bombardier CSeries?

They are comparable to the 737.

enda1

One of the big reasons for choosing Boeing is the US exchequer credit terms to promote American exports which RyanAir can get (being European) and American companies can not. Similarly they can not get this type of credit gift if buying European airplanes. so expect them to stay with Boeing.

Also some one mentioned SW airlines having the same cheap fares...

SW average fare is 99 euro, ryanair is 31 euro.

CaptainSkidmark

was there ever any more about his long haul flights?

Mailman

he talked about it with Finucane on RTE RADIO1. He can't get leases on planes for another year or three if I remember correctly.

pclancy

Imagine the pain of 8 hours in a 737-800 configured the way theirs are all the way across the Atlantic. I'd be gone totally mad.

EchoIndia

Mailman wrote: »

he talked about it with Finucane on RTE RADIO1. He can't get leases on planes for another year or three if I remember correctly.

Funny, the desert airfields of the western USA are packed with airliners of all sorts looking for new homes.

Mailman

Are they latest version low hours 737s 757s A330s A340s? I doubt it.

EchoIndia

Mailman wrote: »

Are they latest version low hours 737s 757s A330s A340s? I doubt it.

He has not specified at all what types he is interested in. Aircraft of the types you mention are changing hands all the time, though of course 757 production ceased in 2003 so the available fleet is finite and indeed shrinking over time as older machines are retired or converted to freighters.

The idea of a low-cost long-haul FR operation has been trailed for several years now; I suspect the reasons why it has not commenced may be more to do with the economics of such operations, where it may be much harder profitably to sustain substantially lower fares than established operators, than merely aircraft availability.

Dacian

MoL has repeatedly said the long haul opearation will commence when there is a glut of used widebodies on the market.So another 2-3 years is a good estimate. I assume B767 would be the optimal aircraft. Same as they did with FR, cheap second hand a/c to start then hope to get a great deal on a large order.

I suppose he could hope to start with a few secondhand B747. Didn't AirAsiaX do that,or was that Oasis? And sure Virgin Atlantic started ith a single B747 in 1984.

Run_to_da_hills

Clever move by O'Leary, his shares have just surged.

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Heard a rumour he was eyeing used 777's but that could be BS.

Fratton Fred

I don't think there is such thing as an "Amicable" relationship between any aircraft manufacturer and an airline.

I heard a "Story" the other day how an Airbus sales rep lost his rag with Aer Lingus over the purchase of the A330s, EI rightly were trying to screw every penny they could out of Airbus and the representative told EI's then chief exec that Aer Lingus were a second rate regional airline and that Airbus were only interested in the big prestigious airlines.

I would love to have seen his face when soon after BA announced who their new CEO was going to be

Gurgle

Its just business.

O'Leary wants 200 planes but could live without them for the moment.

Boeing would like to sell him 200 planes, but they're busy enough that they can live without the order for the moment.

The deal will go through when one side or the other needs it to.

This is nothing like the situation after 9/11, he made a fire-sale purchase of cancelled orders and they were grateful to see any cash coming in.

In that case Ryanair got the planes cheap, but Boeing also got to bank the deposits off the cancelled orders.

The only losers were the airlines whose directors panicked and started pulling out plugs.

Stovepipe

Hi there,
O'Leary has already had one go at the Boeing nipple and they were hurt by that.He bet them down to about 26 million per plane, when they needed orders badly, compared to the ticket price of then 48 million per plane.Later, he sold off the oldest of them, just before they were due for their most expensive maintenance check, to RBS, for near enough to 45 million per plane.So, he won out twice and fair dues to him.Now, Boeing, who are fat on defence sales, don't crave his custom as much as they used to and are prepared to tell him to eff off or meet them on more realistic terms.Airbus haven't forgotten the way he treated them when he was originally looking for new aircraft, so they are delighted at this snub.What goes around, comes around.
regards
Stovepipe