Boeing Lands $11 Billion Deal After Redesigning 737 Max to Add Seats

Europe’s leading low-cost carrier, Ryanair, launched a new, higher-density version of Boeing’s 737 MAX Monday with a commitment to order up to 200 of the new planes, which can carry up to 200 passengers.

The deal is valued at $22 billion at list prices, though with a typical large discount on a big order the real price is likely about half that.

At a press conference in New York, Ryanair’s brash CEO, Michael O’Leary, said he felt like a child unwrapping a present and getting just what he’d asked for.

“We’ve been pushing Boeing for the last 10 years to try to get close to 200 seats,” O’Leary said. “Finally, we are getting the aircraft we wanted.”

O’Leary said the new order is in addition to the 175 current-model 737s he ordered at the Paris Air Show in June 2013, with another five tacked on earlier this year.

He said receiving 380 737s in the next 10 years, along with retirement of some older planes, means Ryanair’s fleet will swell from 300 to 520 Boeing aircraft by the end of 2023.

O’Leary will visit Seattle Tuesday to take the first of the jets ordered in Paris. The Irish airline’s position as a premier Boeing customer is now secured — it is now set to take an average of more than three jets every month for the next decade.

The deal announced Monday is a firm order for 100 of the new higher-density 737s, with options to buy 100 more at similar pricing. However, O’Leary insisted that Ryanair has always taken all the options it has ever agreed to.

“I confidently believe we’ll take all 200,” he said.

At the launch, O’Leary outlined a bold plan to use that fleet growth to take more market share in Europe, increasing the number of passengers flown annually from 82 million today to 150 million 10 years from now.

He said Ryanair, which today typically flies into smaller regional airports some distance away from Europe’s major city centers, will expand into more primary airports and directly compete there with flag carriers such as Air France, British Airways and Lufthansa.

O’Leary took jabs at Europe’s “many old, failing flag carriers,” which he said are cutting capacity on short-haul routes because of competition from Ryanair and other low-cost carriers.

“We intend to use these brilliant new aircraft to expand into those markets,” he said. He promised “a new price war in Europe, which, like all the old price wars, Ryanair will win.”

Ryanair’s current average fare is just $60.

The new version of the 737, which was announced at the Farnborough Air Show in July, comes with an extra door just aft of the wing, which removes a regulatory limit on the plane’s capacity.

With the extra door allowing passengers to exit faster in an emergency, the plane is technically allowed to carry 200 passengers — which O’Leary said is the “sweet spot” for short-haul travel — and is called the 737 MAX 200.

Space for the extra seats is made by removing galleys fore and aft — there’ll be no food on the planned all-economy, no-frills, short-haul service — and by introducing new, thinner seats.

O’Leary insisted that in this way, this higher-density version of the 737 will actually have slightly “more leg room” than the current model.

Ryanair will configure the cabin with just 197 passengers, to avoid having to add another flight attendant.

The current 737-8 has a maximum capacity of 189 seats. O’Leary said the eight extra seats “will generate about $1 million annually per aircraft in additional revenue … almost straight to the bottom line.”

Combined with the MAX’s fuel-efficient engines, that would make the new MAX 200 model 20 percent more cost-efficient per seat over current 737s.

The rival Airbus plane of this size, the A320, carries only 180 passengers, though the European jetmaker has said it’s studying how to increase the capacity to 189 passengers.

But with this new, high-density MAX 200, “Boeing has leap-frogged them again,” O’Leary said.

Boeing Commercial Airplanes chief Ray Conner said in New York that the jetmaker projects fully 35 percent of all single-aisle jet sales in the future going to low-cost carriers.

O’Leary predicted that with Ryanair’s order leading the way, Boeing will soon have “a flood” of low-cost airlines lining up to buy the new jet.

This article appeared in print in the September 9th, 2014 edition of Hamodia.