Oct. 15 (Bloomberg) -- Ryanair Holdings Plc and Southwest Airlines Co., two of the biggest operators of Boeing Co. 737 single-aisle jets, are pushing the manufacturer for new engines to help cut fuel costs if an all-new model remains years away.
Fuel accounts for almost 40 percent of the airline’s expenses, and a manufacturer that could deliver a plane with 12 percent to 14 percent higher fuel efficiency would let Dublin-based Ryanair cut its costs per passenger by 10 percent to 12 percent, Chief Financial Officer Howard Millar said in a telephone interview.
“It’s a very significant number that you can’t ignore,” Millar said yesterday. “We’re obviously very interested” in the concept of new engines.
Boeing and Airbus SAS are weighing the merits of an upgrade for their best-selling planes as they’ve pushed back plans to develop new ones until as late as 2025, saying technology isn’t ready. Both companies aim to decide by year-end whether to offer new engines on existing models by the middle of this decade to help customers reduce fuel consumption in the meantime.
Boeing, which initially targeted 2015 for a replacement to the 737, has said it would prefer to focus on a new jet because customers don’t see a business case for the interim-engine step. Chief Executive Officer Jim McNerney has said customers would wait for a new plane if it’s possible by early next decade, a timeline that the Chicago-based company is assessing this year.
“We certainly recognize the need for new economics,” Mike Van de Ven, Southwest’s chief operating officer, said today. “We are indifferent to whether that’s a new airplane or a re-engined airplane. One thing is for sure, waiting until 2025 to make a change is not an option.”
Ryanair’s Millar said his preference would be an all-new single-aisle aircraft that could offer even greater savings than one with a new engine. However, delays on recent aircraft programs such as Boeing’s 787 Dreamliner and Airbus’s A380 show that manufacturers tend to struggle to maintain their proposed introduction schedules for new jets, he said.
“Boeing’s talking about maybe building a new plane for 2020, but what is that date realistically?” Millar said. “It’s probably a bit further out. The ability of any manufacturer to deliver anything on time has to be questioned these days.”
Boeing’s decision may slide into next year as the company continues to study the market and technology, its commercial president, Jim Albaugh, said in a Sept. 27 interview. Airbus has also pushed back its verdict by several months.
Airbus Chief Executive Officer Tom Enders met with the Toulouse, France-based company’s executive committee this week, and the managers decided to delay an announcement, said two people familiar with the matter, who spoke on condition of anonymity because the plan hasn’t been made public.
While Airbus has been more open to the concept of new engines, the company has cautioned that embarking on the project may cause a shortage of engineers on other programs, such as the A380 superjumbo that’s only lately been stabilized, and the A350 wide-body jet that Airbus wants to bring to the market by 2013.
Boeing faces similar concerns, as its engineers finish work on the 787 Dreamliner, now almost three years behind schedule, and 747-8 jumbo jet and begin revamping the 777 to intensify competition with the A350.
Ryanair and Dallas-based Southwest operate with exclusively Boeing fleets. The Irish discount carrier has 250 737-800s and plans to increase its fleet to 299 by March 2013. Southwest, the world’s largest low-cost airline, has 544 737s, with 116 on order.
Albaugh said in July that Southwest’s CEO will be “very involved” in Boeing’s single-aisle decision and “whatever we do, it’s going to be something that Gary Kelly likes.”
Fitting new engines on the Boeing model is more complex than on the Airbus, because the wings sit closer to the ground, requiring changes to parts including landing gear. The cost of an all-new jet is about $10 billion. New engines would cost no more than 1.5 billion euros ($2.11 billion) and be ready for service around 2015, Airbus estimates.
While new engines promise to cut specific fuel consumption by about 15 percent, the savings on direct costs to airlines would translate into just half that amount as fuel is only part of the cost in operating planes. Another compromise is a likely cut to payload or range, because the new engines are heavier.
The power plants on offer are made by Pratt & Whitney and CFM International, a joint venture between General Electric Co. and France’s Safran. The 737 now operates on only CFM engines, while the Airbus A320 has two engine options.
“It’s really a decision for the manufacturers,” Millar said. “It’s still evolving as to what they’ll do. Boeing has talked about it, Airbus seems closer to doing it, but obviously we’re very interested in what’s going on in that space.”