DBEA55AED16C0C92252A6554BC1553B2 Clicky DBEA55AED16C0C92252A6554BC1553B2 Clicky
July 19, 2024
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We highly recommend you read this link.  What caught our eye is at the bottom of the article.  “Anyone concerned with Ryanair’s growth coming to a sudden end when the airline’s ordered 737-800s are fully delivered in 2012 can, however, be calmed by Millar’s enthusiasm over Airbus’s recent indications that a re-engined A320 family is to be announced imminently. He argues that this will put pressure on Boeing to do the same, referring to the ended talks with the American aircraft manufacturer last December as “one of the best decisions we never made.””

This suggests something  illuminating.  Ryanair is considering that Airbus’ re-engine decision will drive Boeing to respond.  This then seems to suggest that Ryanair is still in the Boeing camp.  Not buying more of the current 737-800 seems also to be a decision they are glad about.

Airlines, when dealing with OEMs, like to play something of a game. Ryanair did its last huge deal right after 9/11 and got pricing it will never see again – ever. Boeing was so scared at the time (who could blame them?) that a big buy from Ryanair kept the factories busy even as other orders were delayed or canceled.

Playing the game is risky though. Airlines and OEMs jockey for bargaining power.  Buying (and selling) decisions are big bets.  You can be sure that Airbus and Boeing closely monitor each others production to ensure they have the best possible idea of bargaining power. If Ryanair were to try squeeze a better deal out of Boeing, it helps to know if Airbus could even deliver what the airline wants.  If Boeing is sure it cannot, then they maintain their bargaining power.

But as many will tell you, the duopoly days are coming to an end. Even if most of the sales at Farnborough this week are for Airbus and Boeing.  Ryanair is a Boeing bellwether customer, just like Southwest.  Both airlines are open about wanting something more fuel efficient.  The option in the short term is a re-engine program and the quickest possible offering would be the 737 and A320 fitted with the Pratt & Whitney PurePower engine. And its not just Boeing being pushed by its biggest customers. Airbus is under pressure from a big customer too – easyJet even made a mock up of the plane they like.

Since Airbus and Boeing are in a race with each other, neither wants to make the first move unless it knows the other cannot move fast enough. Airbus could announce a re-engine program first, but has to worry about Boeing announcing a clean sheet design. The stakes here are enormous.

The decisions airlines and OEMs are facing at present is critical.  What happens next will play out over decades. The question is who blinks first?  If,  just to throw a cat among the pigeons, Southwest (or WestJet) as a big 737-700 customer were to decide it will buy Bombardier’s CSeries because it is the “right size” and has the “right engine”, you can imagine the impact of a sudden logjam bursting free.  Before dismissing this as an outlandish scenario, United’s CEO Glenn Tilton has been quoted as saying the CSeries is the “natural replacement” for the 737.  Stranger things have happened.

It may be that we are at such a logjam stage in the lifecycle of the 737 and A320. Something will break the logjam.   This is a great time to be watching the players and forces work through the process of defining the next narrow body solution.

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