MOL told Reuters,
if for some reason we can't conclude an agreement with Boeing and Airbus, certainly by the end of the year, we will simply announce we are not going to buy any more aircraft
.
He added
we will then stop growing beyond 2012 when our current delivery stream runs out.
The carrier stated it wants to conclude an order for 200 aircraft from either Boeing or Airbus by the end of 2009, for delivery after 2012.
Now its tough to read too much into one statement without context. But on the other hand we are able to see this latest comment in the context of this being a well known subject with many previous comments. Consequently, what can one deduce from the latest one?
It seems that MOL is not getting the deal he wants. There is no doubt that Airbus wants a Ryanair order. There is no doubt that Boeing wants to keep the customer. So the suppliers will play ball. But not at any price. And MOL is a bottom feeder - he will pressurize both vendors for essentially a sale at cost. Neither of them are that desperate in terms of narrow bodies, though each 787 cancellation adds pressure for another 3 narrows to hold order book value...not that OBV means anything, right?
Further, we know that MOL needs more planes to grow. Italy beckons and that in turn opens up the entire Med market. From Cyprus to Spain. Eastern Europe also offers rich pickings. Opportunities exist for Ryanair to grow nicely and the current target of 67m passengers can easily be built upon. Tripled easily within 5 years, we reckon...given adequate commitment from airframe manufacturers. Does Boeing want them, or does Boeing not. THIS is the question.
Therefore it would seem to us, that with Ryanair's commitment to the 737, the airline has breached the tipping point. And Boeing knows this. The last deal they did with Ryanair was made during desperate times. It is one they will not repeat. Ryanair cannot maintain its low costs if they switch to the A320, or run a mixed fleet. That means advantage Boeing and MOL is now coming to realize this. But he is no fool, and will play out his hand. The threat to stop growing hurts nobody but the airline itself. So discount those words.
The rate at which the airline will take deliveries tends to ensure that only Airbus and Boeing could act as a supplier. But that said, if MOL can accept the risk of slightly higher MRO costs and a tad more complexity in terms of fleet, he could turn the market upside down by ordering from Embraer (would roll over and give him the terms he wants) or Bombardier (ditto for CS-300). The increased costs would be offset, in our view, by having more flexibility in gauge for entering and building new markets. Stand by for a shocking Autumn announcement.
Whiplash Out.