Canny operator has European airports lining up
Published 02/06/2010 | 05:00
MICHAEL O'Leary knows how to haggle for a good deal.
Airports around Europe have fallen over themselves to sign up Ryanair as a customer with its promise of a surge in passenger numbers through terminals, which in some cases might otherwise resemble ghost towns.
But negotiations with US aircraft manufacturer Boeing were a different matter entirely. Ryanair had proposed to mimic the deal of the century it had pulled off in 2002 when it ordered 100 aircraft from Boeing at a deep discount following the previous year's US terror attacks that crippled the aviation industry.
Boeing jumped then at the chance to pull in such a big order. This time around, even with the world economies trying to claw their way out of recessions, it wasn't going to play footsie.
It is understood, however, that the framework of a potential deal was significantly advanced before the talks collapsed last December and that the sticking points were Ryanair's warranty demands.
Mr O'Leary told the Irish Independent at the time: "Boeing thought we were bluffing. We weren't."
While some tentative contact was initiated at the time with Toulouse-based aircraft maker Airbus, its CEO John Leahy said he had not seen any "reasonable" offer from Mr O'Leary.
The talks with Boeing are firmly on ice. That has meant instead of immediately ordering new aircraft to fuel the next wave of Ryanair's expansion, the company will be generating significantly more money than it plans to spend.
It is currently spending about €1.2bn a year on capital expenditure, including paying for the remaining aircraft of its existing order with Boeing.
Once those orders for a total of 112 aircraft are complete in 2012, Ryanair's capital expenditure requirements will fall away to next to nothing relative to the amount of money it generates.
Mr O'Leary has estimated that the company would have about €4bn of cash by 2012 -- including the €1bn it is planning to return to investors.
Some industry insiders questioned whether Ryanair would be able to deploy a significantly expanded fleet if it had inked a deal with Boeing last year.
They questioned if there were really that many destinations Ryanair could fly to on a profitable basis.
Deputy chief Michael Cawley said yesterday that new route opportunities still abound, citing Turkey.
He expects a raft of services could be launched to Turkey in about a year's time.