Europe’s largest budget airline, Ryanair (RYAAY), announced an agreement with Boeing (BA) Thursday to purchase 75 additional 737 Max aircraft, bringing the carrier’s total Max commitment to 210 and curtailing Boeing’s drought of orders and accumulated cancellations after the jet’s involvement in two fatal crashes.
“It gives us great pleasure to announce today that we’re increasing our aircraft order by 75 units,” Ryanair CEO Michael O’Leary said from an in-person signing ceremony in Washington DC. O’Leary also said Ryanair would “compress” its order so that delivery of the aircraft would happen faster over the next five years, with the first deliveries made in the early spring.
Ryanair’s CEO acknowledged that safety was a concern with the 737 Max.
“One issue that’s going to come up here today is safety,” O’Leary said. “So let's get it out in front. This is the most scrutinized, most audited aircraft in history. It's also going to be one of the safest aircraft that's ever been delivered. What's not often understood about the Boeing Max is it's already accomplished over 840,000 flight hours...46 million people have already flown in the Max and loved it.”
Passengers concerned over safety of boarding a Ryanair Max will be permitted to change their flight.
An order to ‘build momentum’ for Boeing
Ryanair’s specially-configured planes seat 4% more passengers than the standard model, allowing for 197 passengers rather than 189. So far, 27 of Ryanair’s aircraft have been manufactured, according to CEO of Boeing Commercial Airplanes, Stan Deal, who attended the event with Boeing’s CEO David Calhoun.
“This order builds momentum going into next year,” Deal said.
Asked what changed for O’Leary since he admonished Boeing over anticipated delivery delays for the embattled aircraft and the domino effect the grounding could create for its staff, he said relations with Boeing changed when its new management team was put in place.
“You got a sense there was a new sheriff in town,” O’Leary said, referring to the resignation last year of Boeing CEO Dennis Muilenburg and appointment of Calhoun.
While O’Leary said Ryanair received a “modest” discount on its order, Calhoun said Boeing is not concerned about the economics of the Max program.
“We don’t feel a need to discount our way into the marketplace,” Calhoun said, adding that advancements in the development of COVID-19 vaccines make Boeing’s anticipated timeframe for the Max reintegration into the market probably a little more aggressive. Boeing previously said it expected the recovery to take three to five years.
Ongoing safety concerns
Outside the U.S. the aircraft remains subject to groundings. In mid-November, the Federal Aviation Authority (FAA) became the first global regulator to reauthorize the aircraft for passenger flights, once new systems are installed. The agency was the last to ground the planes following the October 2018 and March 2019 crashes. European regulators are expected to follow suit in mid-January.
On Wednesday, American Airlines demonstrated the 737 Max 8 aircraft to journalists during a round-trip exhibition flight between Dallas and Tulsa. Crash victims’ family members criticized the event for promoting an aircraft that they say remains unsafe.
Before the Max can return to passenger flights, new flight control computer and cockpit display system software must be installed, revised operating procedures must be incorporated into the Airplane Flight Manual, horizontal stabilizer trim wires must be rerouted, and sensor system tests must be performed.
At the time of the FAA’s order permitting the Max 8 to resume passenger flights, Boeing said approximately 450 manufactured Max aircraft remained in its possession and not delivered to customers.
As of its third quarter, Boeing disclosed $20 billion of discrete costs associated with the Max grounding. The figure takes into account additional costs to produce and deliver the first approximately 3,000 airplanes, given slower production rate and delivery timelines, and estimated compensation for customers for the disruption to their fleet operations.
Alexis Keenan is a legal reporter for Yahoo Finance. Follow Alexis on Twitter @alexiskweed.