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April 23, 2024
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To start off the week we have two announcements; Ryanair/Boeing and Azul/Airbus.  Both were non-competitive orders.  What make of them?First Ryanair – the airline has always been a Boeing customer.  Its irascible leader, Michael O’Leary led the airline in its latest order for 100 MAX8-200s.  The $11bn (list) order was finalized last week and took 35 seconds, after being placed in September. The deal includes another 100 options – and based on past performance, will be exercised. 

Ryanair 737MAX200

“These new ‘gamechanger’ aircraft will allow Ryanair to lower our costs and airfares, while improving our customer experience with more leg room and the Boeing Sky Interior, as we roll out new offers, particularly for our Business Plus and Family Extra customers. As many of Europe’s flag carriers cut capacity on short haul routes, Ryanair looks forward to using these new 737 MAX 200 aircraft to grow at many more of Europe’s primary airports,” said O’Leary.  The aircraft certainly is a game changer in that it is likely to make the MAX9 even less attractive.  O’Leary’s first reaction to the MAX was decidedly unpleasant: “dog’s dinner of a design” that had been drawn “on the back of a fag packet as a response to the [Airbus] Neo”.

Airbus and Ryanair are like oil and water – they don’t mix.  In 2009 O’Leary was caught out claiming he was negotiating with Airbus and Boeing – Airbus’ John Leahy denied there were any talks going on.  That said, Ryanair is reputed to be the airline that invariably gets the lowest prices when it orders 737s.  The fact that the order was non-competitive doesn’t mean much – it secured a “significant” discount as it has done with each of its big orders.

Next Azul – now this one is a lot more interesting. Azul and Airbus announced an order for 35 A320neos plus leasing another 28 A320neos (20 from AerCap and 8 from GECAS).  Unusually at this early stage, Azul already selected CFM engines.

A320neo_Azul_2The particularly interesting item about this order is that it was non-competitive – despite what its CEO said.  We understand that Boeing never got an RFP to respond to.  We are also advised that Airbus was badgered for lower prices by the airline under the guise that the order was competitive.  Airbus, as we understand it, knew there was a game going on.  Given that Azul had already committed to A330s and A350s, it likely got a deal.  But we suspect the deal might have been even sharper had the contest been real.

The contrast between these two orders is sharp – Ryanair was always going to buy Boeing. Airbus won’t trade with O’Leary.  But being a long time customer with regular orders in the hundreds, Boeing has learned to tolerate O’Leary’s media comments.  They know he’ll be back back because there is no other option.  (He has even flirted with COMAC) But Azul could have been different – yet it tried the O’Leary trick of claiming competitive consideration.  Unlike Airbus, Boeing did call out CEO David Neeleman.

We suspect that though Ryanair got a deal, it was not necessarily the best deal on MAX to date (American probably got that one).  Azul got a deal from Airbus, not as good as it could have been and only because it bought also widebodies, so allowing Airbus to look at the whole deal and price accordingly.

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