Boeing (BA, Financial) and its European rival Airbus (EADSY, Financial) are giving each other very tough competition. My last report discussed about Airbus receiving an order from Frontier Airlines for nine A321 jets, the jet that competes with Boeing’s 737 series, and I had mentioned that with the latest order Airbus is giving Boeing’s narrow-body offerings a touch time. But, as per the latest development, Boeing may bounce back in the game quickly with an orders for 200 737 Max jets from Ryanair. Let’s dig in to get some insight on the deal and its relevance in the narrow-body battle.
A quick look at the order
Ryanair, the Irish low cost carrier (LCC), plans to order 100 737 MAXs along with option to buy another 100, and analysts are valuing the deal at $22 billion at list prices. It’s not every day that a deal of such magnitude happens and that’s what is making it special. Ryanair’s shareholders have approved the plan with 99.93% votes in favor of the order, and industry experts are expecting a confirmation on the order very soon.
According to Ryanair CEO Michael O’Leary, “Ryanair is proud and honoured to become the lead operator of Boeing’s 737 “gamechanger” aircraft. This order will expand our fleet to approx 520 aircraft by 2024 and create another 10,000 new jobs for pilots, cabin crew and engineers in Europe, while allowing us to grow our traffic to over 150m p.a.” Michael believes the jet will help the carrier to bring down its operating costs by 18% and also its fares and thus help in offering better value to its customers.
About the jet
Boeing came up with the idea to re-engineer the widely popular 737 and launch the 737 MAX as a response to the growing popularity of A320neo. Initially Boeing had plans of building a plane from scratch, but after witnessing the kind of response Airbus bagged after upgrading to new engines on the A320, it decided to change lanes. The 737 MAX is the fourth generation of the 737 family and is scheduled for first delivery in 2017, and with the Ryanair order in place, the jet maker has bagged more than 2,500 orders for the model. The jet delivers better fuel efficiency thanks to the wing design improvements and the use of winglets.
Seizing the opportunity
The fight for a greater narrow body market share is intensifying between Airbus and Boeing as both plane makers are looking to bag big orders. Boeing forecasts that more than 25,000 narrow body planes will be delivered in the next 20 years. Airbus has an edge in the narrow body segment, thus it’s important for Boeing to pull up its socks to capitalize on the prospect. Narrow body deliveries make a solid chunk of the total deliveries of Boeing and helps in generating cash flows. So every order that Boeing gets is important. Not only does it help its to compensate for the billions of dollar its spending in the Dreamliner project, but it also helps in edging closer to Airbus.
