Low-cost carrier Ryanair is set to become Europe's biggest airline, following its order for 100 new aircraft in a deal with Boeing worth around €5 billion (£3.94 billion), writes Mary Canniffe
The company also has options on a further 50 aircraft between now and 2008 as part of the overall deal. The move will lead to a major expansion of its network, with new hubs likely to be developed in Italy and Scandinavia.
The acquisition programme will make it the low-cost airline with the youngest fleet of aircraft in Europe and will also make Ryanair the biggest European airline, bigger than major flag carriers such as British Airways Lufthansa and Air France.
Ryanair will buy up to 150 new 737-800 aircraft between 2002 and 2008. Neither side would disclose the prices involved. Based on the $60 million (€68.28 million) per aircraft list price for 737-800s the deal would have a capital value of some $9 billion. But in weak markets for aircraft manufacturers and following the intense competition between Boeing and Airbus for the order, Ryanair will have secured significant discounts on the list prices.
A discount of about 40 to 45 per cent would bring the cost to Ryanair of the 150 aircraft down to between $4.95 billion and $5.4 billion. The contract, made up of 100 firm orders and 50 options on aircraft, is the biggest ever single order for next generation 737s.
Chief executive Mr Michael O'Leary said he could not disclose the cost of the aircraft or the discounts because of confidentiality clauses in the contract. He described it as "an exceptional deal" at prices "substantially lower" than those on the 17 Boeing options recently cancelled by Ryanair.
Ryanair has put low-cost loan finance in place with US exporters bank EXIM to fund 85 per cent of the purchase price and the balance out of its own cash. "We have ambitious growth targets and plan to grow from carrying over 10 million passengers per annum to over 40 million. So we will always keep all funding options under constant review," he said.
The new fleet will underpin Ryanair's expansion plans in Europe where it plans to grow by 25 per cent per annum. "When we reduced fares after September 11th we saw a mushrooming in demand and with seats out of our new Hahn in Germany selling like hot cakes we need this new fleet".
Ryanair currently operates a fleet of 49 aircraft. The latest acquisition plan could boost its fleet to almost 200 aircraft within eight years.
Meanwhile, Ryanair's plans to acquire up to 150 new Boeings could be a welcome boost for hundreds of aerospace workers in Belfast. Bombardier's aerospace divisions in Northern Ireland manufacture the rudder for the 737-800 series of aircraft.
"While the 737 rudder is a relatively small programme compared to Bombardier programmes returning confidence in the airline market is welcome news," said a Bombardier spokesman. "It is too early to say whether this order will have any effect on our lower production rates and therefore on jobs. However it may help to secure jobs in the longer term."
Additional reporting Francess McDonnell
