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