Ireland’s Ryanair, Europe’s largest low-cost carrier, has agreed to buy 200 Boeing 737NG’s at rock bottom pricing, estimated at about $9 billion.
An industry source who is close to the Ryanair deal and attending the aircraft financing conference of the International Society for Transport Aircraft Trading here, confirmed the order, which was first reported in the Irish Independent newspaper Tuesday morning.
The newspaper said the deal will be officially announced next week when Irish Prime Minister Enda Kenny meets President Barack Obama.
The deal is important for Boeing because the 737NG is the current single-aisle model, and this order provides a bridge to keep production of that model going strong until the 737MAX replacement comes online in 2017.
Ryanair’s order alone will provide five solid months of production at the 737 assembly line in Renton, Wash.
Typically, when a new model airplane is in the pipeline, pricing for the old model sinks precipitously.
Boeing and Airbus have been competing vigorously in narrow-body jet sales campaigns this year, both trying to sell their new models – the 737MAX and the A320neo, respectively – and fill in the production lineup for the older models.
Last week, Boeing Commercial Airplanes CEO Ray Conner, speaking at the JPMorgan conference in New York, admitted that pricing in those campaigns has been “a little bit aggressive.”
Speaking Monday at the aircraft-financing conference, Airbus sales chief John Leahy echoed that, complaining of “very aggressive pricing” by Boeing.
Tuesday in Orlando, the industry source described the Ryanair pricing as “unbelievably low.”
Ryanair is second only to Southwest Airlines in Boeing’s lineup of 737 customers, and its CEO, Michael O’Leary, has fiercely and publicly demanded low pricing, which is the basis of his business model.
Ryanair has already taken delivery of 348 Boeing 737’s.
In 2009, as the airline approached the end of that delivery stream, O’Leary pulled out of discussions over a big replacement order for 200 more, complaining loudly about the lack of a sufficiently large discount.
Now, with Boeing needing to fill the gap until the MAX comes in, he’s got terms more to his liking.
In 2005, a Ryanair regulatory filing indicated that the airline had gotten a discount of at least 53 percent on an order for 70 jets.
Assuming this order represents at least as good a deal, O’Leary will have paid about $8.4 billion for his 200 airplanes, against a typical discount price of $9.6 billion and the list price of $17.8 billion.