Monday 18 December 2017

Ryanair enjoys spoils of fight for dominance in skies

RYANAIR'S order for 175 Boeing 737 aircraft placed earlier this year represented more than a massive purchase for the Irish airline – it was also a real coup for US manufacturer Boeing in its battle against Airbus for dominance in the skies.

Boeing and Airbus compete aggressively for a roughly equal share of the $100bn (€76.6bn) civil jet market, though their fortunes have see-sawed in the past two years as first Airbus then Boeing racked up orders for new fuel-saving models.

Ryanair's deal, worth about $15.6bn, was the largest single order ever placed by a European airline with Boeing, but its orders from emerging market customers, especially in Asian and Middle Eastern countries where travel demand is soaring, are proving to be the decider.

Competition is very tight – between 2003 and 2012 Airbus received about 7,700 orders while delivering 4,500 finished aircraft. Boeing received 7,300 orders and delivered 4,100 finished craft.

Each of the big two now has a backlog of more than 4,000 aircraft. These backlogs come down to very long delivery times, in part because both Boeing and Airbus use subcontractors to build most of the pieces of their planes – often the same subcontractors – but also simply because big aircraft take time to build.

More recently, Boeing has edged ahead, booking an impressive 1,203 orders in 2012 compared to 833 by Airbus. But investor confidence in Boeing took a serious hit earlier this year after international regulators suspended flights of the Boeing 787 Dreamliner, its newest and much-lauded jumbo jet. That was after lithium-ion batteries on two separate aircraft ignited. And yesterday, Heathrow Airport was closed for a short while after an Ethiopian Airline's Dreamliner caught fire on the runway. No passengers were aboard at the time.

The A350, which made its maiden flight last month, is Airbus's answer to the Dreamliner. The battle between the two models was a key feature of this year's Paris Air Show, the industry's most important annual event.

Competition between the two has resulted in an epic price war, with customers as the main beneficiary. Ryanair boss Michael O'Leary has suggested that his airline's most recent order from Boeing was close to one of the best prices ever reached.

The carrier is now considering another 737 order from the American manufacturer – as many as 200 planes. While Airbus is still in the running with its A320neo, the Boeing model has an advantage because it offers nine more seats. "Being able to offer 189 seats rather than 180 is pretty compelling," Mr O'Leary said, adding that the capacity difference was equivalent to $1m a year. A deal for 200 737s would be worth $20bn at list prices, exceeding even Ryanair's own record.

There are other commercial aircraft manufacturers, but none have posed a genuine challenge to the Airbus-Boeing duopoly. The one potentially serious contender is The Commercial Aircraft Corporation of China, or COMAC – but critics say it could take 10 years before COMAC develops the technology to really pose a problem for the EU and US giants.

Sarah McCabe

Irish Independent

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