Hungry for another plane deal

Ryanair's O'Leary is hungry for another plane deal

Dominance was founded on a discounted deal to buy 100 Boeing planes in 2002, but now it is also talking to the manufacturer's rivals as it looks to expand again.


Michael O'Leary used the Financial Times this morning to tee up Boeing for another jet auction as he said his airline, the largest short-haul player in Europe, was in talks with the US manufacturer and rivals in Russia and China over a new mega-order.

Cut-price airplane deals have been a key factor in Ryanair's love-them-or-hate-them ascendancy. The budget carrier business was pioneered by Herb Kelleher, former chief executive of Dallas's Southwest Airlines, who ran his airline on four principles: fly one type of plane to keep down engineering costs; whittle away at overheads; turn round the aircraft quickly (so avoid expensive and congested airports like Heathrow); and abandon air miles schemes.

A 2002 deal with Boeing was key to Ryanair's aeronautical dominance of the noughties. It ordered 100 Boeing 737-800 jets with options to buy a further 50 in a transaction that was worth a headline price of $9.1bn although it is understood that Rynair secured a significant discount. With newer, more fuel efficient planes than many of its rivals Ryanair was able to hold down costs, charge lower fares and pack jets with passengers who might not spend a huge amount on tickets but spend profitable sums on food, hotel reservations and the inevitable bag check-in charges.

For all O'Leary's talk over the past year of dealing with a maturing business that will have to ascend the "yield curve" - airline lingo for whacking fares up - his interview indicates that he is trying to pull off the same trick again. O'Leary said he was in talks with Boeing, China's Comac and Russia's Irkut that could double the size of a fleet due to reach 300 planes next year when the last plane under the Boeing order expires.

Will he get a cut-price deal? There aren't many airlines in the market for 300 short-haul jets at the moment although the Airbus A320 neo is doing brisk business. Nonetheless, Ryanair can be confident of getting a good deal, not least because they're a sharp bunch (as Airbus found to its cost in 2002 when O'Leary left them at the altar). The question is whether, in a saturated European market, it can pull off another phase of expansion as profitable as the 2002-2010 period when Ryanair swept all before them.

When O'Leary talks about charging higher fares, he is acknowledging that the boom in pile-'em-high-sell-'em-cheap air travel will be difficult to sustain. There are only so many weekends in Sardinia that you can squeeze out of consumers. So he might get his plane deal, but the bigger issue is getting the passengers to fill them at the right price.

Toby Nicol, a strategic communications specialist and veteran Ryanair watcher as a former easyJet executive, said: "O'Leary's best option is to form a long-term partnership with either China's Comac or Russia's Irkut, securing a once-in-a-generation price in the process. Filling planes won't be Ryanair's headache - but filling them profitably will. With O'Leary's 'cost onion' now fully peeled, the airline is seeking ever more exotic ways to increase revenue without increasing headline fares: Ryanair has found that there's only so much cost that can be removed and only so many things that can be charged for."

http://www.independent.ie/business/irish/ryanair-aims-to-double-passengers-and-become-one-of-worldrsquos-biggest-airlines-2914801.html

Extracts :

The boss of the budget airline told the Financial Times that he wanted to increase passenger numbers to between 120 million and 130 million over the next decade - which would make Ryanair one of the biggest airlines in the world.
Mr O'Leary said the airline is in talks with plane makers Boeing, Comac in China, and Russia's Irkut over the purchase of 200 to 300 new narrow-bodied aircraft.
Mr O'Leary added that Ryanair could increase its share of the European market as the tough economic environment boosts demand for low-cost travel.
The outspoken Irishman said the airline could deploy 50 new aircraft to serve Scandinavia and a further 100 to service the Baltic states, Poland, Hungary and the Czech Republic.

there are rumours about up to 5 bases in PL