Ryanair slashes growth outlook on Boeing crisis

16/07/2019 | 582 words
Ryanair slashes growth outlook on Boeing crisis

Ryanair on Tuesday slashed its growth outlook and said it would temporarily shut bases as crisis-hit Boeing pushes back plane delivery owing to fatal crashes that grounded its 737 MAX jets.

Ryanair expects to receive only 30 new Boeing 737 MAX jets by late May, instead of a planned 58, the Irish no-frills carrier said in a statement.

It hopes to take delivery of its first MAX 200 jet between January and February 2020, it added.

"This shortfall in aircraft deliveries will necessitate some base cuts and closures for summer 2020, but also for the winter 2019 schedule," said Ryanair chief executive Michael O'Leary.

"We will... be consulting with our people and our unions in planning and implementing these base cuts and closures, which are directly caused by the B737 MAX delivery delays to the B737 MAX program."

Ryanair would not be drawn on any possible job cuts but the Dublin-based group said it now expected passenger growth to rise by only three percent this summer, rather than by seven.

The airline cut its full-year 2020/2021 passenger traffic forecast to 157 million from 162 million.

Ryanair is overhauling its activities into distinct operations, mirroring a set-up by British Airways-owner IAG, as part of its strategy to reach 200 million passengers per year by 2024.

- 'Remains committed' -

Despite Tuesday's setback, Ryanair said it remained committed to orders of up to 210 new Boeing 737 jets, including 135 MAX 200s. It also has options for 75 more MAX 200s.

Boeing's global fleet of 737 MAX planes has been grounded since mid-March following the second of two catastrophic accidents in Indonesia and Ethiopia which killed 346 people.

"Ryanair remains committed to the B737 MAX aircraft, and now expects that it will return to flying service before the end of 2019, however the exact date of this return remains uncertain," O'Leary said.

"Boeing is hoping that a certification package will be submitted to regulators by September with a return to service shortly thereafter.

"We believe it would be prudent to plan for that date to slip by some months, possibly as late as December."

Boeing has been boosted recently also by British Airways signing a letter of intent for delivery of 200 of the 737 MAX jets worth $24 billion (21 billion euros).

As for Ryanair, analyst Neil Wilson on Tuesday warned that the airline's update had dealt a serious blow to its expansion plans for next year.

"Uncertainty over Boeing 737 MAX aircraft has shattered Ryanair's 2020 planning," Wilson said in a note.

"Management say they will be basing schedules for next year on having about half the MAX planes they thought they would have."

Independent air transport consultant John Strickland forecast that Ryanair would seek compensation from Boeing over the delays -- and seek to clamp down on airport costs as well.

"Ryanair will negotiate strongly with Boeing for compensation due to delivery delays," he told AFP.

"If these delays put pressure on planned growth for 2020 then it's also an opportunity to negotiate with airports to secure the best cost deals for whatever capacity is available."

Boeing has developed a software upgrade to the 737 MAX after problems with a flight handling system were tied to the Lion Air and Ethiopian Airlines crashes. But the jet has still not been cleared by regulators to resume flying.

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