Mr. O’Leary got a deal he could live with, while Mr. Calhoun got a deal he could live with. Does it matter what the strike price is? The key number is the operating cost difference between a Ryanair MAX10 and a Wizz Air A321. What might the MAX10 vs. A321 in the European market look like?
As we usually do, we turn to skailark‘s excellent cost model to get some ideas. We are starting with a few metrics for January 2023. On a broad brush look, Wizz has five areas of advantage over Ryanair, and Ryanair has two areas better than Wizz.  Wizz only has a 1.3% cost advantage concerning cost per block hour. So the competition is tight.
Digging into the data, we discover this when making metrics comparable. “Burden,” the sum of overhead and fuel, accounts for over half the two airline operating expenses. While Ryanair has lower-cost fuel, Wizz has a big advantage in overhead. Confirming the table above, the difference between the two is marginal.
Where is the difference, then? Why does Ryanair’s O’Leary want the MAX 10? Here is where we think the answer becomes clearer. The aircraft shown below are flown by these two airlines; fortunately, there’s no crossover to muddle the data. Since fuel is the biggest input, we will focus on that.
The MAX8-200 deployed by Ryanair shows a sharp improvement in fuel burn over -800NG (35.4%). Meanwhile, at Wizz, the A320neo shows a 23% improved fuel burn over the A320ceo. In these segments, the two are running neck and neck.
When you get to the A321neo, note it burns 12.5% more fuel per seat but seats 239 compared to 200 for the Max 8-200. At such tight margins, the 15% more capacity means, all things being equal, 15% more revenue. Ryanair wants that revenue, and Mr. O’Leary pointedly spoke about the ancillary revenue potential the MAX 10 offers. The larger airplane should fly further; therefore, ancillary revenue potential rises – passengers will get thirsty and hungry. They likely run out of snacks in their pockets on longer flights.
The MAX 8-200 does not compete effectively with the A321neo. But the MAX 10 does. The MAX 10 will take longer to load and unload. But the comparison with the MAX 8-200 is the wrong one. It should take as long as the A321neo, which is the appropriate yardstick.
If Wizz is Ryanair’s most effective competitor in Europe, then the MAX 10 is what Ryanair needs to ensure it remains competitive. The final table lists new deliveries for these two airlines from 2021 through 5/8/23. {Table updated since initial publication]
Wizz bet on the A321neo, which was a smart move. That model is in very high demand. Ryanair bet on the MAX 8-200 and was the launch customer – which was a smart move then. But the market shifted. Ryanair can’t get the MAX 10s soon enough. Although it is a far larger airline, Ryanair does not want Wizz to grow faster because of model size. This is going to be a fascinating race to watch.
