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Ryanair's €17bn jet order to spark air price war


Michael O'Leary, Ryanair CEO

Michael O'Leary, Ryanair CEO

Getty Images

Michael O'Leary, Ryanair CEO

Passengers will benefit from an all-out airfare price war after Ryanair placed a huge €17bn ($22bn) order with Boeing for up to 200 new jets.

Chief executive Michael O'Leary predicted the massive order will herald a fares war throughout Europe as Ryanair, which employs 9,500 people, vies to increase the number of passengers it carries every year from 81 million to 150 million.

Mr O'Leary called the order for the new breed of 737 aircraft, known as the 'Max', a "game-changer" for both Ryanair and the industry.

Ryanair's fleet will increase to 520 aircraft by 2024 and up to 6,000 new staff are to be recruited.

"I hope it will hasten in an era of a new price war in Europe over the next 10 years which, like all the old price wars, Ryanair will win," said the airline chief in New York, where the order was confirmed.

Fliers will benefit from more leg room on the new aircraft, as well as a more spacious interior cabin. That's despite the new aircraft having room for eight more passengers than the 189 on the current Ryanair jets.

Overhead luggage compartments on the new 737 Max 200 are recessed into the ceiling, giving a more spacious feel to the cabin.

Mr O'Leary said the extra leg room will be welcomed by passengers, who've long been accustomed to bumping their knees off the seats in front. Most of the new aircraft will be used to grow business in Europe.

But Mr O'Leary said more of north Africa will be within Ryanair's reach, as well as destinations such as Lebanon, Israel and even the Gulf states.

He said Ryanair had been waiting a decade for Boeing to develop the kind of aircraft the Irish airline wanted.

"I feel like a child unwrapping his present on Christmas morning and finding Santa Claus gave him exactly what he wished for," he said.

Ryanair has been turning the screws on traditional flag carriers around Europe as it muscles in on the business traveller market and encourages more families to fly with it.

Analyst Stephen Furlong at Davy Stockbrokers said the order should improve Ryanair’s competitive advantage and see it grow its market share in Europe to about 25pc by 2024.

Shares in Ryanair rose earlier in the day, but closed down just under 1pc. Mr O’Leary said Ryanair had paid more for the aircraft compared to past orders, where he has traditionally secured steeper discounts.

Mr O’Leary predicted that Ryanair will carry 150 million passengers a year by 2024. It currently carries 81m a year.

Speaking to the Irish Independent, Ryanair chief financial officer Howard Millar said that the 100 options would have to be exercised by 2018 so deliveries of those aircraft could begin by 2020.

The 100 firm orders will be delivered between 2019 and 2023.

They come on top of another huge order for 180 Boeing aircraft placed last year by Ryanair.

Mr O’Leary and Mr Howard were among the Ryanair team heading to Seattle yesterday to take delivery of the first jets under that order.

Mr Millar said that buying the 200 jets would see Ryanair boost its workforce to around 15,000 from the current 9,500.

Mr O’Leary said the 727 Max 200 is the “aircraft we’ve been waiting for in Ryanair probably for about 10 years” and will enable the airline to have a “controlled rate of growth” in the next 10 years and to offer lower fares.

Each new aircraft will carry 197 passengers – eight more than onboard the current 737s Ryanair is using.

“We’re going to expand and grow very strongly in Europe, both in new markets and also going in and taking traffic away from incumbent carriers.”

Mr O’Leary said having the extra eight seats on the aircraft will have an immediate revenue impact.

“Those eight extra seats, on an aircraft operating six times a day with an 85pc load factor, with a €50 average fare, will generate about $1m (€773,000) in revenue annually per aircraft.”

“This truly the game-changer aircraft,” he said. The Max jet also uses 20pc less fuel than the existing 737.

“It’s going to change the game for low-fare air travel. It’s certainly going to change the game in Europe in the next 10 years.”

Irish Independent