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Boeing closed its first firm order for the troubled 737 Max on Thursday since the plane was grounded 20 months ago, with a multi-million dollar deal for 75 airliners from Ryanair, Europe’s largest low-cost carrier.
The order marks the beginning of efforts to rehabilitate the aircraft, as well as Boeing’s own reputation, after two fatal accidents in five months left 346 dead.
Post-crash investigations revealed that Boeing had concealed design flaws in flight control software from both pilots and regulators in a race to get the plane certified.
The faulty anti-lock system, considered a critical factor in accidents, has been redesigned and pilots will have to go through more extensive training programs.
Last month, the Federal Aviation Administration declared the plane safe to fly and other regulators are expected to do the same in the coming weeks.
Michael O’Leary, CEO of Ryanair, already one of Boeing’s biggest Max customers, said he was “confident that our customers will love these new aircraft.”
At list prices, the order is worth about $ 8 billion, but analysts expect the Ryanair boss to have negotiated a steep discount. Airplanes are typically sold at discounts of around 50 percent off list prices, but the reduction is likely to have been even greater in the current climate.
While Ryanair “was never going to buy another type of aircraft,” said Rob Stallard, an aerospace analyst at Vertical Research Partners, “it all came down to money. . . I think we can safely assume that the price was right for Michael O’Leary. ”
The price could have been mitigated by easing upfront payments, the cost of EU tariffs imposed on Boeing jets in the ongoing battle for subsidies and “a lot of flexibility in delivery spaces,” he said.
Ryanair and Boeing said there had been a “modest reduction in the price of this new aircraft order,” which incorporated part of the compensation owed to the airline.
Ryanair’s decision to commit to fleet expansion during one of the industry’s deepest recessions also indicates its determination to cement a cost advantage over emerging competitors like fast-growing Wizz Air.
The 737 Max 8200 is based on the main variant of the Max 8, but will be able to carry approximately eight more revenue-generating passengers. Ryanair said it would start receiving the plane from early next year until December 2024. This brings the airline’s total order for these larger jets to 210. They would be used to replace the older NG variant and were up 16 percent. . more fuel efficient.
For Boeing, the hope is that the order will spark confidence in the Max, which even before the crisis was lagging behind rival Airbus’ A320 Family in net orders.
In total, 4,489 single-aisle Max jets have been sold versus 7,455 variants of Airbus’ A320neo, according to Fleet Data Specialists Cirium. Cirium also notes that just over 1,000 Max orders have been canceled or deemed by Boeing to be at risk of cancellation this year alone.
Analysts said the order from Ryanair was to be expected, given that the low-cost carrier is one of the world’s largest operators of 737 aircraft and passenger confidence mattered to both the airline and Boeing.
Furthermore, the deal is unlikely to generate a large cash boost for Boeing, which will owe the airline substantial compensation for delays in delivering an original 135 Max 200 order placed in 2014, and the aircraft must enter service in April 2019.
Boeing has estimated that the total additional costs as a result of the accidents and subsequent grounding of the 737 Max could reach at least $ 20 billion.
American Airlines, another large 737 operator, plans to run its first commercial service using a Max aircraft on December 29 between Miami and New York.
