Ryanair threatens to pull Boeing orders in price spat

 
 
Published: 10/28/2009 12:22 PM

Ryanair Holdings Plc, Europe's biggest discount airline, said it will cancel existing aircraft orders with Boeing Co. if the U.S. manufacturer doesn't cut the asking price for a new batch of planes.

Negotiations with Boeing over a contract for as many as 200 short-haul aircraft are progressing "slowly," Chief Executive Officer Michael O'Leary said today at a briefing in Hamburg. Ryanair may respond by shelving the requirement and scrapping and deferring some current contracts, he said.

"There would certainly be cancellations," O'Leary said. "We're only committed to whoever sells us the lowest-price airplanes. We're not wasting any more time."

Ryanair had a fleet of 199 Boeing 737-800 jetliners as of July 31, with another 113 planes on order for delivery over the next three years, equivalent to 5 percent of the 737 backlog. O'Leary said today that Airbus SAS, which has previously regarded Ryanair as a solid Boeing customer, should take his airline's requirements "more seriously" and enter talks.

The CEO said that if Dublin-based Ryanair can't buy new planes at the right price he'll rein in growth plans and focus on preserving cash.

Boeing spokesman Jim Condelles in Seattle said the company doesn't comment on discussions with customers.

"My instinct is that they will eventually reach an agreement, though that doesn't mean you won't see Ryanair throw their toys out of the pram in the meantime," said Gerald Khoo, an analyst at Arbuthnot Securities in London with a "neutral" rating on the stock.

Khoo said O'Leary's bargaining position is plausible.

"The slower growth strategy that Ryanair has suggested they may pursue is a credible alternative, even if it is not the preferred alternative," the analyst said.

Ryanair closed down 4.5 percent at 2.97 euros in Dublin as European stocks fell the most in three weeks. Chicago-based Boeing was little changed at $47.65 at 12:52 p.m. in New York.