Ryanair is buying 75 additional 737 Max jets from Boeing, by far the largest order for the troubled plane since it was grounded nearly two years ago.
Boeing (BA) won approval last month from the Federal Aviation Administration for the plane to carry passengers once again. Now Boeing (BA) awaits clearance from several other aviation regulators worldwide, including European authorities, which have indicated their approval is close. The March 2019 grounding followed two fatal crashes that killed 346 people.
Ryanair (RYAAY), the largest discount airline in Europe, already had placed orders for 135 of the Max aircraft, making it one of the jet’s largest customers in the world. But the Irish airline had not taken delivery of any before the grounding.
Like most airlines around the globe, Ryanair has parked many of its planes because of the sharp decline in air travel worldwide caused by the coronavirus. During the first three months of the pandemic in Europe, Ryanair grounded 99% of its planes. It will not reveal how many remain parked. Its fleet is comprised of 440 of an earlier version of the 737 and 26 Airbus A320 jets.
“For as long as the Covid-19 pandemic depresses air travel, we will use these new aircraft to replace some of our older Boeing [planes in our] fleet, which will remain grounded until pre-Covid demand returns,” said Ryanair CEO Michael O’Leary. “But as soon as the Covid-19 virus recedes – and it will in 2021 with the rollout of multiple effective vaccines – Ryanair …[will] rapidly restore flights and schedules.”
This is by far the largest order for the 737 Max since the grounding. Boeing has reported firm orders for only 42 of the jet, spread across multiple airlines since then. At the Paris Air Show in June 2019, International Airlines Group, the owner of Aer Lingus, British Airways, Iberia and other European carriers, signed a letter of intent to buy 200 of the 737 Max jets, but that agreement has yet to result in any firm orders.
Boeing has been stung by huge order cancellations for the Max since the start of this year, as airlines tried to conserve cash amid a global plummet in travel. Normally airlines won’t cancel an order for a plane because of the massive penalties they would have to pay, but the grounding and the delayed return to service removed those penalties, opening the door for 448 737 Max orders to be canceled so far in 2020.
Boeing has also removed another 782 orders from its 737 Max backlog since the start of the grounding because of uncertainty that it will be able to complete those sales as planned. But it still has a backlog of about 3,400 orders for the plane on its books that will take years to build and deliver.
Many of the canceled orders are for the 450 jets built but not delivered during the grounding. Boeing has been scrambling to find other buyers for those completed planes.
Ryanair says it expects to start taking delivery of the first of its jets in spring 2021, with further deliveries through 2024. It says the value of the 210 jets comes to $22 billion. But the company is unlikely to pay that price for the jets – airlines typically pay closer to half of the list price, especially when ordering more than 100 planes. And industry experts say that Ryanair probably paid even less as the first to buy these planes.
“We are gratified that Ryanair is once again placing its confidence in the Boeing 737 family and building their future fleet with this enlarged firm order,” said Boeing CEO Dave Calhoun.