What The Boeing 737 MAX Grounding Is Costing Ryanair

The prolonged grounding of the Boeing 737 MAX aircraft is growing its burden upon the airlines. Carriers globally are losing profits as their MAXs are stuck on the ground. Additionally, the parking lots around Boeing’s factory are almost full, which has slowed down the production of the series and thus delayed even further some of the forecasted delivery dates. European low-cost carrier Ryanair is one of the airlines most severely impacted by the grounding.

Ryanair planned to receive 25 of the Boeing 737-8-200 by the end of 2019 and the same amount by the of Q2 2020. Photo: Ryanair

Overview of the Boeing 737-8-200 issue at Ryanair

Lack of clarity about the possible return of the MAX series to the European skies makes fleet and network planning extremely difficult for all of the operators of the airplane. However, with 210 Boeing 737 MAX’s on order (135 firm + 75 options), Ryanair is one of the airlines where the impact of the grounding is felt the most.

In early November the airline reduced its growth forecast for summer 2020 to 3%, down from 7%. On top of that Ryanair was forced to close its bases in Nuremberg and Stockholm Skavsta due to the delay in deliveries.

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According to a memorandum sent to pilots by Chief Operating Officer Neal McMahon in late November, Ryanair is now only expecting to receive 10 aircraft ahead of summer 2020, down from 20 previously expected, with a possibility of receiving none at all. Initially, Ryanair was planning to be operating 58 MAX during that period.

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The cost of the grounding is definitely significant for Ryanair, impacting the airline across many areas of functionality. Reduced availability of seats and aircraft hurts revenues and is prolonging the use of older Boeing 737NG. This, in turn, increases operating costs and the uncertainty compromises network planning.

Ryanair currently has 435 Boeing 737’s in its fleet, making it one of the global leaders in terms. Photo: Ryanair

Calculation of the costs

An exact approximation of the actual cost of the grounding is very difficult, yet we have done our best to estimate it.

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Firstly let us take a look at the average fuel consumption on a Ryanair flight. In its environmental report, Ryanair reported that its fuel burn per passenger-km is 0.019l. Assuming Ryanair’s average load factor of 93% and an average flight distance of 1,247km would give us a total fuel burn of 4,164.5kg/flight.

Assuming jet fuel is about 0.80kg/L, that gives us around 5,200 liters, which in turn is about 32.7 barrels of jet fuel. Taking a jet fuel price average for 2019 from IATA of $79.6/bbl would give us a total fuel expenditure on an average flight of around $2,603.

Boeing 737 MAX equipped with the new CFM LEAP-1B engines together with its scimitar winglets and other aerodynamic improvements are expected to reduce fuel consumption by approximately 16% per seat compared to the Boeing 737-800NGs. If Ryanair were to operate a Boeing 737-8-200 instead of a 737NG, on an average route it would use 4,368 liters, reducing the fuel cost per flight to $2,187.

Boeing 737-8-200 also provides an increase in the number of available seats by 4%, bringing the total to 197. Flying at an average load factor would increase Ryanair’s revenue from the additional 7 seats by around $412/flight (assuming reported avg ticket price of 37 Euro + average ancillary revenue of $18/passenger)

Assuming other costs and revenues remain constant, on average Ryanair is losing around $830 per flight due to the grounding of the Boeing 737MAX series. What is worth noting is that this loss translates almost directly to a loss in net profit for the airline, and thus has a significant impact on its bottom line.

Ryanair was forced to lay off some of its staff due to the delay in deliveries. Photo: Ryanair

Summer 2020 costs

Now, let’s take a look at the expected loss Ryanair will incur during summer 2020, assuming it receives 10 of the Boeing 737-8-200’s, versus 58 initially planned. The calculation is based on the assumption that all the new MAX’s would replace older Boeing 737 NG’s and not operate on new routes.

According to Airtravel genius Ryanair utilizes its aircraft 9.1 hours per day which, given an average flight duration of 1hr and 48mins, gives us five flights per aircraft per day.

Being short of 48 aircraft, each flying five times daily over the course of three months will cost Ryanair around $18 million. $18 million might not seem like a lot, however, it would directly translate to profits and there $18 million means a lot. In fact, it is about 2% of Ryanair’s 2018/19 total profitability.

Assuming a worst-case scenario of receiving zero aircraft by, let’s say, September 2020, this would cost Ryanair an approximated $60 million.

Of course, once we start adding lease extension costs and extra staff costs, the total burden of the grounding grows significantly.

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Bryce

Excellent, detailed article! Two comments: – The Ryanair average fuel burn of 0.019l per passenger km translates to 1.9 liters per 100km per passenger, i.e. more than 50km per liter. An astounding level of fuel economy when compared to petrol/diesel cars with 1 or 2 occupants. This may come as quite a shock to Greta Thunberg and her climate goblins! – Ryanair’s main LCC competitors in Europe — Easyjet, Wizzair, Vueling, Eurowings — are all-Airbus carriers (with the exception of three 737 NGs at Eurowings)…so they’re unaffected by the MAX fiasco. Accordingly, Ryanair’s woes are exacerbated by the fact that… Read more »

eolosbcn

Yo can’t do such comparisons. Without airplanes is inconcevaible to lunch in London and dinner in Barcelona. So eventually the difference between car and plane would be x liters consumed by the plane and 0 for the car, because never is going to happen that trip with car.

Not against planes, but for the sake of precission

Bryce

There are plenty of people who drive from the Benelux to southern France or the Alps for a vacation, and there are also plenty of people who fly that route.
Similarly, there are people who fly between Los Angeles and Las Vegas, and there are people who drive that route.

Any other convoluted comments?

Andy

With Eurostar it is possible to have lunch on the Mediterranean in Marseilles and dinner in London with zero carbon emissions.

Bryce

Since neither France nor Britain generates 100% of its electricity in a zero-emission manner, I don’t know where you get the “zero emissions” claim from. You also forget the huge emissions associated with constructing the channel tunnel, and the connecting infrastructure on each side; those emissions typically take about 30 years to amortize environmentally (for standard rail infrastructure; much longer for a long tunnel). And don’t forget those nasty transmission losses…which typically amount to 7% of the electricity consumed (and, thus, equate to more emissions).

Trains are great, but they’re not as green as some people seem to think…

K.P.

There is no such thing as ZERO Emissions – its an oxymoron – if its electric – something has to generate that power – and since you can only put up so many electric wind generation stations, solar panels, and hydro plants, cause people have to live somewhere, this whole CARBON neutral thing is total crap. Lets have a big war, kill off a few hundred million people and see if that doesn’t stop global warming.

Doris Dr.

Better compare that with a modern diesel bus and not with individual cars. It tanslates to 0,31l per 100km (42l per 100km with 78 passengers). So maybe the flying microraptors are more shocked than the goblins. CO2 in 5000m is also much more harmful for the atmosphere.

Bryce

Seeing as FAR more people are traveling around in cars than in buses, the comparison is still very valid.
Also, last time I checked, neither a car nor a bus was capable of crossing an ocean…or of efficiently traversing a mountain range….or of traveling at 850 km/h.

I have yet to see a single, cogent proof of the relative detriment of C02 emissions at altitude rather than sea level. Perhaps you could provide a link?

TheDude

Seriously? There was an article about this last week. Is it required to post a daily article about the Max? Good grief. Talk about easy click bait.

Eamon

Well, seeing as Boeing is providing the world with ongoing grief regarding the MAX, why shouldn’t the world provide an ongoing analysis of that grief? 😉

TheDude

Gee because it is nothing new. No new information. No crap groundings hurt airlines. Duh. The exact same information is posted daily. It is utterly useless. Just a place for bashers to pile on.

Eamon

Yep…just like Boeing itself: same old crap every day, same misinformation, same jaded designs, same denials…

TheDude

Riiight…the 220 can’t go fast high and the NEO engines are a joke.

Kaden

Excuse Me!

Sphere

The A320 uses the CFM LEAP — same engines as the MAX. So you are also saying that the MAX’s engines are a joke. Lol.

K.P.

OH CMON – without Boeing – what would the boys at Airbus copy?

Niklas Andersson

Maybe 737 MAX ? or 777 X ?

Matt

Since we haven’t heard O’Leary cry publicly about the cost, we can be pretty confident that whatever the cost of this grounding is, Boeing is the one eating it, not Ryanair. Whatever their deal, for O’Leary to be satisfied, it had to be heavy in their favor.

Andy

Boeing can eat all the fuel, crew and maintenance costs, but Ryanair and Southwest have lost Market share, possibly forever, to their competitors that operate A320s. Alegiant, Frontier, Spirit, EasyJet, Vueling and Wizz are all pure A320 operators and also easily add A321xlr for long haul flights.

Bryce

Exactly. While Ryanair and Southwest are cringing, their competitors are stealing customers and expanding. And Ryanair and Southwest STILL have the uncertainty of not knowing if passengers will get on the MAX if it’s ever ungrounded…

Doris Dr.

Ryanair have bet their future on a bad American redesign, as it was cheaper than the new model of their European neighbors right next to their nose. They will have earned their market share lost.

K.P.

Till those airlines have to start paying that Tariff on those Airbus aircraft and Alabama may not be spared the latest round since Airbus wants to continue to whine about the unfair economic aid that they STILL are getting for their products, maybe we should give Boeing what they wanted, 100% tariff on AIrbus planes — bet those orders would cool off really really fast then

TonytTDK

KP,
Another stupid, brainwashed comment from you.?
Sure Airbus gets ‘benefits’ from their home countries, but they’re soft loans, not gifts.
Boeing gets local & national tax breaks amounting to gifts of $millions. Boeing gets huge amounts of ‘sweeteners’ such as rent & land tax grants, as well as loans & grants to enable them to start-up their facilities away from Seattle.
I don’t know if Airbus OR Boeing gets the biggest benefits. I suspect overall, there’s really very little in it.?

Niklas Andersson

KP. Airbus may build a new plan in USA, discussion are on going in Pittsburgh… Hope you will be happier ?

Mike Smith

Your seeming to forget that Airbus currently have a similar suit going through against Boeing.
If they REALLY wanted to play hard ball they would push for 100% tariffs in Europe on Boeing products. That, my friend, would more than likely finish the Max.
Im really hoping the Easa go to town on the Max when they get hold of it, along with the 777X.

Colm

You can be assured Michael o’Leary will make Boeing pay for every single cent!!! Plus squeeze a few free planes out of them.

bluefrog

and so he should !! LOL and when he does get those max flying a 1 euro flight bonanza ?

Armand2REP

Everyone says Airbus couldn’t take over for the cancellation of the 737 MAX because they are back-ordered until 2024 but I say this is a fallacy. The bottleneck for A320 production is getting LEAP engines from CFM. Those orders are currently hogged by deliveries for yet to be cancelled 737 MAX. If it was cancelled, those slots would be open for Airbus to get all of the LEAP engines they need for increased production. With four production lines going in France, Germany, the US and China… it would be possible to double production.