Ryanair Has Paused Payments To Boeing For 737 MAX Aircraft

Yesterday, it was reported that Ryanair has frozen payments to Boeing while it waits for the 737 MAX to gain approval for commercial passenger service. The information comes from  Bloomberg as the airline’s Chief Executive Officer Michael O’Leary was addressing the audience of Ryanair’s annual shareholders meeting. The airline has 135 of the Boeing aircraft type on order. At list prices, this is worth over US$16 billion.

Ryanair Boeing 737 MAX
The Irish airline is still waiting for its first MAX. Photo: Boeing

Furthermore, the Financial Times reports that O’Leary and Ryanair have no back-up plan for a “nightmare scenario” in which the aircraft was grounded permanently. However, he didn’t think it was a scenario that would be likely to happen.

Assessing the impact

Now in its seventh month of being grounded, the Boeing 737 MAX has been a critical piece in the schedules of airlines around the world – Ryanair is no exception. O’Leary is clearly hoping for the grounding to lift in the next three months:

“If it flies in North America this side of Christmas then I think we’re pretty secure. We’ll be back flying by sometime in the end of February/March. If it runs any later than March, April, May — we will then have to take more aircraft out of next summer’s schedule and slow down the growth further.” -Michael O’Leary

The first 737 MAX 200 should have been delivered to Ryanair earlier this year. However, deliveries were postponed pending the recertification of the type. Originally, Ryanair had expected to have 58 in service in time for the summer of 2020.

Bloomberg also reports that further delays will likely lead to job losses. O’Leary states, that the airline currently sits at a 500-pilot surplus. “The number has moved between 500 and 700, some of that depends on the MAX delays,” he said.

Furthermore, the budget carrier already issued warnings in July that it could close some European bases while shrinking others. The airline was originally planning a large expansion for next summer in anticipation of new aircraft deliveries.

Still waiting on the FAA and EASA

Ryanair Boeing 737 MAX Rebrand
Ryanair is expecting 135 new Boeing 737 MAX 200 aircraft. Photo: Ryanair

Whether or not the 737 MAX flies again depends on the civil aviation authority of each country. However, most aviation bodies follow the lead of the U.S. Federal Aviation Administration (FAA) or the European Aviation Safety Agency (EASA). Both of these governing bodies are “largely on the same page” about the plane, says O’Leary. However, he says they don’t agree on everything.

“It’s clear at the moment that most of Boeing’s time and effort is focused on addressing the FAA first,” – Michael O’Leary via Bloomberg

Video of the day:

The FAA has taken a lot of criticism since the second 737 MAX crash that involved an Ethiopian Airlines flight. It was reluctant to ground the plane while other aviation authorities – notably the Chinese Civil Aviation Administration – acted first. The whole ordeal has led many to ask if Boeing has too much influence on the FAA.

As a result, the EASA has said it will not blindly follow FAA if or when the Americans approve the 737 MAX’s return to service. The European agency is instead insisting that it runs its own tests, including safety assessments and flight testing for one full week.

According to Bloomberg, Boeing has said the jet may return on a “phased” timetable. In this scenario, regulators around the world would make decisions at their own pace, without following the lead of the FAA. India says it plans to join EASA in making its own assessment. The EASA is planning to send its own pilots to the U.S. to conduct flight tests.

Conclusion

Freezing payments seems like a wise decision from Ryanair. Boeing is in a less-than-ideal position to fight, and it allows Ryanair to hold on to some free cash flow to cope with the grounding and flight cancellations due to pilot strikes.

With Ryanair’s large order and its notable influence in the aviation world, do you think other airlines will follow their move? Should they? Let us know in the comments!

Single Aircraft Type
Ryanair was expecting their first Boeing 737 MAX aircraft in April. Photo: Ryanair

Simple Flying reached out to Ryanair for comment on the matter. At the time of publishing this article, no response was received.

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Ade

Must be an extra zero on this statement: “The airline has 135 of the Boeing aircraft type on order. At list prices this is worth over US$160 billion.” Either that or they anticipate fixing the MAX is going to be very expensive per aircraft. 🙂

Arran Rice

Thanks for spotting this Ade, we have taken of a zero 🙂

Frank

“However, most aviation bodies follow the lead of the U.S. Federal Aviation Administration (FAA) or the European Aviation Safety Agency (EASA). ” I think this statement should be made in the past tense. The FAA has scuppered it’s name as the premier agency for aviation around the world and the newest member of the “We’ll check for ourselves, Thanks” club, is Australia “Australia may ban Boeing 737 Max even if US gives it all-clear Civil Aviation Safety Authority says it will make its own call on the 737 Max, which was grounded after two crashes left 346 dead” https://www.theguardian.com/business/2019/sep/20/australia-may-ban-boeing-737-max-even-if-us-gives-it-all-clear China,… Read more »

shapes

I did wonder who would be the first of the current max owners to stop payments, Bit of a cheek boing still made them pay. I expect everyone will jump on the bandwagon now or risk being last in the queue for any payouts. Not sure what boing has been doing to support its max customers apart from issuing empty promises since the grounding.

Frank

Well – the PR department has kinda been working overtime lately – so there is that.

Vince

Indeed! I am surprised that airlines are still paying Boeing despite not recieving the plane.

NoBeatAboutBush

If by the time the dust settles and some airlines find they are failing because of the grounding of the MAX, is Boeing going to jump to their rescue and set things right? Very unlikely. Airlines will have an uphill battle to recover all of their losses from Boeing. Withholding further payments, if they can, is the wise thing to do. Reportedly, now that 6 months have passed with some orders not having been fulfilled by Boeing, some airlines will contractually be in their right to withhold payment or to cancel such late orders. Airlines could also be biding their… Read more »

David Kavanagh

Ryanair has an exemplary safety record and it will have to be 100 per cent sure about the safety of the B737 MAX notwithstanding the re-certification of it by the FAA and EASA.

Old Stick

It seems to me that any airline which has purchased the B737 Max has the right to stall payments if Boeing is not fully compensating the airline for losses due to grounding of the aircraft. Full compensation involves refunding payments AND compensating the airline for damage to their bottom line caused by the grounding. But calculating the damage to the bottom line is tricky. Since both Boeing and the airlines are unlikely to agree on a damage assessment it would probably require independent accounting by a court appointed adjudicator. Until such a court appointed adjudicator be appointed, stalling payments is… Read more »

Tom

“The first 737 MAX 200 ” What’s a “MAX 200”?

Tom Boon