Ryanair Holdings Plc (RYA), which has no planes on order beyond 2012, expects to be able to snap up jets at short notice if required as rival carriers struggle to fund purchases, Chief Executive Officer Michael O’Leary said today.
Norwegian Air Shuttle AS (NAS) and PT Lion Mentari Airlines of Indonesia are unlikely to be able to pay for all 300 Boeing Co. (BA:US) 737 MAX single-aisle planes they have on order, O’Leary said in an interview. NAS also has orders for 100 Airbus SAS A320neos.
“An enormous quantity of the existing orders for Airbus and Boeing won’t be delivered, unless there’s enough manufacturer- financing in place,” O’Leary said, adding that Lion Air “can’t buy a bag of sweets” and NAS “doesn’t have any oil wells.”
Ryanair, an all-Boeing operator, remains skeptical about the re-engined 737 MAX, O’Leary said, questioning its capacity, efficiency and waste-handling costs. Europe’s biggest discount carrier has said it will also consider Airbus’s neo, and the Dublin-based company is working with Commercial Aircraft Corp. of China on the C919, a new entrant to the single-aisle market.
With oil at $120 a barrel, economies slowing and used- aircraft values collapsing, order books shouldn’t be full for two or three years as they are now, and they’re being supported by purchases from airlines that “can’t fund them,” O’Leary said.
The Norwegian Air (NAS:US) order, announced Jan. 25, is for 100 737 MAX8s plus 22 of Boeing’s existing 737-800s, together with the 100 neos. It also has options for 100 MAX8s and 50 neos. Lion Air has ordered 201 MAX jets and 29 extended-range 737-900s.
Norwegian, Europe’s fourth-largest low-cost operator, “doesn’t make any money, at least no significant money, and it certainly can’t fund an order for 200 to 400 aircraft,” O’Leary said. The company isn’t competitive outside Norway, he said.
“The trick is to have the discretion to wait until you’re at the bottom of the cycle, and that certainly isn’t now,” he said in Brussels. “You have silly people like Norwegian out there ordering huge numbers of aircraft that they can’t afford.”
NAS spokeswoman Asa Larsson didn’t immediately comment. Chief Executive Officer Bjoern Kjos said on placing the orders that they were supported by the Export-Import Bank of the U.S. and European Export Credit Agencies. Loans will comprise 85 percent of the value, requiring 10 billion kroner ($1.7 billion) in equity, Pareto Securities analyst Per Kristian Reppe says.
Lion Air, where nobody could be reached after hours, will use export credits, loans and sale-and-leaseback deals to help pay for planes, President Director Rusdi Kirana said Feb. 14.
O’Leary said all evidence Ryanair has seen indicates that Boeing’s MAX, “as a product, is rubbish.” The Airbus neo, announced before the Boeing model, “does credibly deliver” a 12 to 14 percent saving on fuel burn, he said, while the C919 is a “glorified” version of the A320 and thus lacks development risk.
Ryanair’s chief interest is in spurring development of a longer version of the Chinese plane with more than the 174 seats planned for the baseline model, according to the CEO.
“We’re working on them to design a 199-seat aircraft, which we believe is where the real sweet spot will be,” he said. “If they produce it, it will wipe out the 737-800 and the A320. But it’s clearly 2018, 2020 before that would be delivered.”
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