Low-cost airline Ryanair is today expected to announce orders and options to acquire up to 100 new aircraft in 2003-08 from manufacturers Boeing. The plan is expected to be announced at a joint press conference with Boeing in London today.
At current list prices for 737 aircraft the deal could cost about $4.5 billion (€5.1 billion) over the five-year period. But in weak markets for aircraft manufacturers the price could fall to $3 billion to $3.5 billion because Ryanair is expected to get significant discounts to do the deal - details of the discounts are unlikely to be disclosed.
In addition to new aircraft, Ryanair is assessing some 2,000 offers on second-hand aircraft received in response to its advertisement for 50 used aircraft. Recent speculation about the airline's fleet replacement plans triggered a drop in its share price last week when analysts at Credit Suisse First Boston warned the company could use its recent share price strength to issue new equity to part-fund the purchase programme.
Ryanair declined to comment on this "market speculation" to The Irish Times. Chief executive Mr Michael O'Leary was quoted in the Sunday Times as saying the CSFB suggestion was wrong but said the company was looking at the possibility of increasing its fleet.
Market sources said yesterday that Ryanair's strong net cash position, its strong cash flow and the long payment timescale involved meant there was no immediate need for the company to issue new equity. But because Ryanair's strategy appears to be to maintain a net cash position it is likely to come to the market for funds sometime over the period of the deal.
Ryanair's current deal with Boeing agreed in March 1998 for delivery up to 2003 involves 25 orders and 20 options over aircraft but the company is exercising only three of these options.
Payment in this deal involved a 1 per cent payment at the time of signing, followed by stage payments of 4 per cent 24 months before delivery, 5 per cent at each of 21, 18, 12, nine and six months before delivery and a final payment of 70 per cent on delivery. Payment terms in the latest deal may be even better, market sources suggested.
Ryanair has a fleet of 49 aircraft comprising 21 of the 130 seater 737-200 aircraft 28 of the 189 seater 737-800s. NCB stockbrokers has estimated the company will need to acquire some 103 aircraft between March 2003 and March 2008 to achieve its own growth targets.
Some 82 additional aircraft will be needed while about 21 existing plans will need to be replaced, according to Merrion Stockbrokers analyst Mr John Mattimoe. The company should be able to largely fund the acquisitions out of its own resources, he suggested. He projected net debt of €500 million (£394 million) at Ryanair in March 2008 when the five-year programme is completed. Boeing declined to discuss the deal or discounts yesterday other than to say there would have been a "discussion" on list prices. Its fourth-quarter net profits fell 79 per cent to $722 million, attributable mainly to the September 11th attacks.
Ryanair also refused to comment.
On Monday, Ryanair played down other weekend reports - attributed to an unnamed Ryanair spokeswoman - that plans for an additional 75 to 100 new and second-hand aircraft within the next five years were "realistic".
Ryanair's third quarter results are due on February 5th. Analysts expect to see revenue lost through seat discounting in the post September 11th period made up through volume increases and cost control. Ryanair shares which hit a high of €7.10 1ast year closed down three cents at €6.35 yesterday.
