Ryanair order 737 MAX 10

[ORAC]

https://news.sky.com/story/ryanair-places-record-order-for-300-planes-after-boeing-price-row-12877114

Ryanair has ended a price feud with Boeing to confirm a deal for 300 new planes which, the no frills carrier said, was a record US order by an Irish company.

Europe's largest airline by passenger numbers said it was buying 150 737 MAX 10 aircraft with an option for a further 150 for delivery between 2027 to 2033.…

It believed the order would allow it to almost double its traffic to 300 million passengers per year by March 2034 from the 168 million flown to the end of March this year.…

[Asturias56]

Ryanair have a lot of previous form doing deals when Mr B is in a bit of a hole...................

O'Leary is a master of timing

[Less Hair]

And inventory management.

[Big Pistons Forever]

And inventory management.

Rumour is it was effectively a 2 for 1 deal on the first 150 with a sweeter deal for Boeing on the second 150, except the second batch is only an option and can be renegotiated.

Boeing is desperate to keep up the sales momentum to juice short term results and they got totally played by O’Leary

[Asturias56]

he's done it before and no doubt is looking forward to doing it again. He actually understands the airline business - boom and bust - and if you are cash rich you buy iron when the manufacturers are hurting

[Gordomac]

Does he have the cash to fund direct purchase ? Or, as is the way these days, a "lease/sale" etc deal. How exactly does he propose financing this "purchase" ?

[Asturias56]

He can do it whatever way he likes - when you're a regular profitmaker and a big player the finance guys will form an orderly queue round the block - its not FlyBe3 - or he might do it out of cash - they have a US 1 Bn in the piggy bank..

"Ryanair posted record profit for the three months to December 31, after increasing airfares by 14% compared to their pre-pandemic level. It will report full year earnings on May 22."

https://www.finance-magazine.com/display_article.php?i=4203&pi=173

Treasury profile: how Ryanair does it

The underlying principles that determine how Ryanair treasury carries out its functions are the risk-averse nature of the Ryanair Group and the fact that the department is a cost centre and not a profit centre writes Neil Sorahan (Ryanair). Treasury activities and risks are managed so that their potential impact does not adversely affect Ryanair financial objectives of increasing EBITDA, maintaining margins and reducing costs. ........................................

Today Ryanair, which has the lowest fares and lowest costs of any airline in Europe, has achieved 15 years of continuous growth at high margins, enjoys a market cap in excess of E5 billion, employs more than 2,200 people and anticipates carrying somewhere in excess of 23 million passengers during the year to 31 March 2004 on its 135 routes. Of these routes, 50 were launched in financial year ended March 2003. In 2003, Ryanair increased its order with Boeing to take delivery of 125 Boeing 737-800 aircraft over the next eight years with an option to buy a further 125 aircraft during that period . Ryanair also completed its first airline acquisition in April 2003 when it acquired Buzz, a subsidiary of KLM. Following a restructure, 12 Buzz routes were successfully re-launched in May 2003.

Ryanair group treasury
During this period of rapid growth, Ryanair Group Treasury (Treasury) has evolved with the business. .................

The Group has a strict policy that no speculative trading in financial instruments shall take place.

Cash management
Due to increased profitability and strong cash flow generation over the past number of years, Ryanair has in excess of €1.1 billion cash on its balance sheet and a net cash position of €168 million at quarter ended 30th September, 2003.

Financing
Corporate and investment funding needs arise primarily from the purchase of new aircraft. The most recent transaction, announced in January of 2023, was an agreement by Ryanair with The Boeing Company to purchase 125 Boeing 737-800 aircraft with an option to buy up to a further 125 aircraft to be delivered over the next eight years.

The Group has financed the purchase of its last 41 aircraft with long-dated amortising bank debt, guaranteed by the Export Import Bank of the United States of America (EXIM). This source of financing has enabled the Group to finance its aircraft at very competitive low cost pricing.

Foreign exchange, interest rate & fuel risk management

Ryanair has a euro denominated balance sheet and profit & loss account. However a large proportion of its costs are US dollar denominated - namely jet fuel, maintenance costs, insurance and aircraft. In addition a significant portion of the Group revenues is in sterling pounds. Where possible, foreign exchange risk is reduced by holding significant assets/liabilities in euro; matching foreign currency income and expenditures with each other; and using financial instruments to hedge a high percentage of the remaining exposures on a twelve-month rolling basis.

Ryanair has traditionally favoured a high level of fixed rate debt. More recently however, in recognition of the fact that the Group has in excess of €1.1 billion floating rate cash, it has taken on floating rate debt that can be matched with floating rate cash to provide a natural interest rate hedge.

Finally, jet fuel costs are Ryanair single largest operating expense. The Group fuel risk policy is to hedge between 70 per cent and 90 per cent of its forecast rolling annual volumes required to ensure that the future cost per gallon is locked in. This policy has been adopted to prevent exposures, in the short-term, to adverse movements in world jet fuel prices and has served the Group well over the past number of years.

Like it or not we do live in interesting and challenging times. As such it is important that an organisation such as Ryanair eliminate as much uncertainty and risk as possible from its decision making process so that it can manage the business that it knows best - namely a low cost/ no frills airline. Treasury endeavours to facilitate this through the implementation of its various treasury polices and the strict adherence to best practice and controls in its day-to-day activities.

Neil Sorahan is head of treasury at Ryanair.

[tdracer]

Rumour is it was effectively a 2 for 1 deal on the first 150 with a sweeter deal for Boeing on the second 150, except the second batch is only an option and can be renegotiated.

Boeing is desperate to keep up the sales momentum to juice short term results and they got totally played by O’Leary
Actually, "2 for 1" is pretty much the standard for large orders - I've long had the rule of thumb that when they announce a big order "worth $X Billion at list prices", the real price being paid is roughly half of that.
I do sometimes wonder why Airbus and Boeing actually bother publishing 'list' prices since nobody actually pays that. And if you buy over 100 of pretty much any airliner, you're going to get a pretty sweet deal.
Then again, I'm pretty sure Boeing has 'inflation' factors built into their contracts - if things keep going they way they are, maybe it really will be worth $30 Billion... :rolleyes:

[Less Hair]

Boeing is now sizing the new Everett assembly line capacity. At this point it is extremely helpful to have early big order customers like FR. This will be reflected in the pricing.

[Rwy in Sight]

he's done it before and no doubt is looking forward to doing it again. He actually understands the airline business - boom and bust - and if you are cash rich you buy iron when the manufacturers are hurting

However it seems this time he orders in boom times for the industry (but then again maybe it is booming for pax traffic though not Boeing).

[Gordomac]

ASTURIAS: Gosh. Excellent reply. Thanks. Blimey, when I asked Bank of Cyprus for E3000 to part-finance ny retirement Beema, they just said "OIX".(...."NO".......)

[Asturias56]

yeah - I know the feeling - just even try opening a bank account -these days - but then I'm not making a billion a year

[BWSBoy6]

Maybe one is earmarked for BOH? Sounds like business is hotting up and the current two based there might not be enough.

[ATC Watcher]

We are in the era of mega orders ( e.g. Air India and Turkish recently) but one possible problem is relying on a single type . We all know the training /maintenance /spares huge benefits but you are also at the mercy of a single AD , and the Max had its share .
Most Legacy airlines evenly split their fleets between A and B.
i also wonder what will happen if , for the sake of the discussion , another Max would go down due to a trim issue.
RYR is also betting on pax looking at the ticket price rather than the type of aircraft when making a booking and they are right so far . But i know quite a lot of people that would definitively stop Flying a Max if there was a 3rd accident . Just ask around .

[oceancrosser]

We are in the era of mega orders ( e.g. Air India and Turkish recently) but one possible problem is relying on a single type . We all know the training /maintenance /spares huge benefits but you are also at the mercy of a single AD , and the Max had its share .
Most Legacy airlines evenly split their fleets between A and B.
i also wonder what will happen if , for the sake of the discussion , another Max would go down due to a trim issue.
RYR is also betting on pax looking at the ticket price rather than the type of aircraft when making a booking and they are right so far . But i know quite a lot of people that would definitively stop Flying a Max if there was a 3rd accident . Just ask around .

Mega orders can also lead to mega deferrals or cancellations one day… just sayin´ It´s not all “onwards and upwards”

[Gordomac]

Indeed. Laker had a big order for more DC10 and A300. Air Europe poked fun commenting;"But they were not around long enough to take delivery" !

AE went bust just after announcing a massive order for MD-11

Instead of being on the first course in Longbeach, I was lining up for welfare in the back-street HQ for the DHSS in Brighton..