Negotiations Unsuccessful Between Ryanair And Boeing

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Negotiations Unsuccessful Between Ryanair And Boeing By Daniel Baxter

		December 19, 2009 - Ryanair, has reported negotiations with Boeing for an order of up to 200 new B737-800 series aircraft for delivery during the period 2013-2016 cannot be successfully concluded prior to the end of the calendar year and accordingly the Board of Ryanair have confirmed that its negotiations with Boeing have terminated unsuccessfully. Ryanair confirmed that the breakdown of these negotiations will not effect its plans to take delivery of 112 B737-800 aircraft during the next 3 calendar years 2010 (48), 2011 (37) and 2012 (27), which will sustain Ryanair’s strong traffic growth over the medium term. Ryanair will now bring forward plans to significantly reduce growth and capital expenditures, in order to maximise cash balances for distribution to shareholders during the period 2012-2015.

Ryanair’s CEO Michael O’Leary said “We regret that our prolonged negotiations with Boeing have failed to reach a mutually acceptable conclusion. While we reached agreement with Boeing on pricing for 200 aircraft deliveries during the 2013-16 period, Boeing were unwilling to incorporate some other terms and conditions from our existing agreement into this new aircraft order. Ryanair has made clear to Boeing that we will not order aircraft if we believe that either the pricing or the other contractual terms and conditions will be inferior to those which we currently enjoy, as this would not be a wise or sensible use of shareholders funds”. “We have no plans to reopen discussions with Boeing or any other aircraft manufacturers. Instead we will focus our efforts on maintaining Ryanair’s strong traffic and new route growth into 2010 and we look forward to briefing shareholders in the first quarter of the New Year with a revised strategy which will comprise much reduced capital expenditures through 2011 and 2012, thereby generating substantial surplus cash balances for distribution during the period 2012-2015. I believe it is appropriate to return these surplus funds to shareholders, if we cannot use them to purchase aircraft on terms which enable us to meet our demanding return on capital targets”. “In the meantime we will continue to work with our partners in Boeing on the 48 deliveries which Ryanair is scheduled to take in 2010 and perhaps in future there may be other opportunities for Ryanair and Boeing to work together to our mutual benefit during the period from 2013 onwards”.

Ryanair is an Irish based low cost airline with its headquarters at Dublin Airport, Ireland, and with primary operational bases at Dublin Airport and London Stansted Airport. Ryanair operates over 200 Boeing 737-800 aircraft on over 950 routes across Europe and Morocco from its 39 bases. The airline has been characterised by rapid expansion, a result of the deregulation of the air industry in Europe in 1992 and the success of its low cost business model. Ryanair is the largest airline in Europe in terms of passenger numbers and the world's largest in terms of international passenger numbers.

Ryanair has grown since its establishment in 1985, from a small airline flying a short hop from Waterford to London, into one of Europe's largest carriers. After taking the rapidly growing airline public in 1997, the money raised was used to expand the airline into a pan-European carrier. Revenues have risen from €231 million in 1998, to some €843 million in 2003 and net profits have increased from €48 million to €239 million, over the same period. Half year profits for the period ended 31 October 2007, included ancillary revenue of €252 million. This activity was associated with the sale of car hire, hotels and travel insurance, as well as on board sales and excess baggage revenues. Ancillary revenue now accounts for just over 16% of total revenues.

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