Ryanair may seek lower price for 737 Max aircraft as compensation

Irish carrier awaiting delivery from Boeing of 210 planes grounded pending software fix

Profits fell at Ryanair in its latest financial year. Photograph: Christian Hartmann/Reuters

Profits fell at Ryanair in its latest financial year. Photograph: Christian Hartmann/Reuters

 

Ryanair could seek compensation from Boeing for business lost from delays in delivering the manufacturer’s new 737 Max aircraft, according to the airline’s chief executive, Michael O’Leary.

The Irish carrier on Monday reported that profit fell 29 per cent to €1.02 billion in the 12 months ended March 31st – the end of its 2019 financial year – from €1.45 billion in 2018.

Air travel safety authorities grounded the newly launched 737 Max this year following crashes that cost 350 lives caused by a software problem that Boeing has begun ironing out.

Mr O’Leary estimated that delays in the delivery of five 737 Max aircraft this summer could cost Ryanair one million extra passengers. “We are in discussions with Boeing,” he confirmed. “I think they will have to sensibly approach the losses.”

He indicated that the compensation could be in the form of lower prices for the 210 737 Max planes that Ryanair has ordered from Boeing. “We are always interested in the price of aircraft, I would like to see some movement from Boeing on the pricing of aircraft and on future orders.”

Further orders

Mr O’Leary also told US broadcaster CNBC that Ryanair could place further orders with Boeing, which supplied all of the Irish carrier’s 450 planes.

He believes that the Max will return to service in the US in June or July, and a month later in Europe.

Ryanair plans buying €700 million worth of its shares back from investors, bringing to €7 billion the total that it has returned to backers since 2008.

Growth in traffic and ancillary services boosted Ryanair’s revenues by 6 per cent to €7.6 billion in 2019, from €7.15 billion the previous financial year.

Passenger numbers rose 7 per cent to 139.1 million. The airline reported 19 per cent growth in the sale of extras such as priority boarding and reserved seats, to €2.4 billion.

While customers spent €17 each on extras, average fares fell by 6 per cent to €37. At the same time, staff costs rose €200 million while its fuel bill increased by €440 million, leaving profits trailing 30 per cent at €1.02 billion.

The figures did not include €140 million start-up costs for Austrian airline Lauda, which Ryanair bought last year, or the three million passengers that the subsidiary flew during the period. This would have cut profit closer to €860 million.

Cut forecasts

Davy analysts Stephen Furlong and Ross Harvey cut their forecasts for Ryanair’s 2020 profit by 9 per cent to €890 million.

However, they suggested that the airline has reached the low point and argued that its lower costs, ability to grow and grab market share and generate cash supported the case for investing in the airline.

Mr O’Leary predicted profit for 2020 would be €750 million to €950 million as fares continue falling. The delays in receiving the 737 Max will contribute to a 2 per cent rise in costs excluding fuel. The airline will pay €460 million more for fuel.

Ryanair paid an extra €50 million to compensate passengers for delays and cancellations in 2019, which it blamed on air traffic control staff shortages and disruptions.

The carrier could face industrial action by pilots in its biggest market, the UK, after enduring strikes in the Republic, Germany and other jurisdictions last year.

Indicative ballot

Reports on Monday said that the British Airline Pilots’ Association (Balpa) was considering an indicative ballot to weigh support for industrial action in a pay dispute. Balpa could follow such a vote with a formal ballot on industrial action, although it is understood that the union favours negotiating a deal with Ryanair.

A Balpa spokeswoman told The Irish Times that it was “not balloting members on industrial action in Ryanair”.

Reuters news agency said that Balpa newsletter to members accused Ryanair of stalling on the union’s pay claim.