Ryanair-Boeing 737 Max Discussions Risk Dragging Beyond Year-End

Ryanair Holdings Plc (RYA), Europe’s biggest discount carrier, may not conclude a deal to add Boeing Co. (BA)’s 737 Max to its fleet by the end of the year as it considers fuel savings and weight costs associated with the jet.

“We have a senior team working on a Max project,” Chief Executive Michael O’Leary said in an interview in London today. “We will then see if we can reach an agreement on price and delivery dates by the end of the calendar year, but I suspect that might be a little bit on the optimistic side.”

A Ryanair team evaluating the Max model is due to report back to Boeing and the airline’s management by the end of September, the executive said. The Irish carrier was looking to seal terms on a Max order by the end of this year after concluding a deal for 175 current-model 737-800s at the Paris Air Show in June. The combined purchases could swell the fleet to more than 500 airplanes from just over 300 today.

“A lot depends on what Boeing wants to do,” O’Leary said. “If Boeing wants an order before the end of the year then one will get done. If they don’t want or need an order before the end of the year, then it might not.”

While Ryanair now has “more clarity” on the potential fuel savings of the Max, the weight of the jet remains a concern, O’Leary said. A deal for 200 737-800 Max planes would be worth $20 billion at the list price of $100.5 million per aircraft. The order confirmed on June 19 -- first announced in March -- has a sticker value of $15.6 billion. Aircraft buyers typically get discounts on their purchases.

More Competition

Ryanair said today it will add five flights a day on U.K.- to-Ireland routes starting in October. Frequencies between Dublin and London Stansted will go up to eight daily rotations from seven. Other destinations where the airline will boost frequencies include Edinburgh and the English cities of Manchester, Bristol and Birmingham.

The additional frequencies are a direct response to Aer Lingus Group Plc (AERL) boosting flights to the U.K. and underscore the fact that competition between the airlines is increasing, Ryanair said in a statement. The airline has been wrangling with regulators since 2006 when it acquired its Aer Lingus holding, which now stands at about 29.8 percent according to data compiled by Bloomberg.

Ryanair’s most recent takeover bid was blocked in February by the European Union, which ruled the combination would increase fares and reduce consumer choice. The U.K. Competition Commission said in May that it’s looking into whether the stake gives Ryanair “the ability to influence the commercial policy and strategy” of Aer Lingus. The U.K. regulator is due to issue a decision on Sept. 5.

“We expect based on the provisional findings that they’ll force us to sell down, possibly to as little as zero, which creates a problem given that all the evidence shows there are no competition concerns,” O’Leary said. “U.K. consumers have benefited from intensified competition.”

The discount carrier may be able to delay its enforcement for years while challenging the EU decision to block its full takeover offer that valued Aer Lingus at 694 million euros ($921 million).

To contact the reporter on this story: Kari Lundgren in London at klundgren2@bloomberg.net

To contact the editor responsible for this story: Benedikt Kammel at bkammel@bloomberg.net

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