Boeing clinches first firm order for 737 Max since aircraft was grounded

Boeing on Thursday clinched its first firm order for the troubled 737 Max since the aircraft was grounded 20 months ago, with a multibillion-dollar deal for 75 passenger jets from Ryanair, Europe’s biggest low-cost airline.

The order marks the beginning of efforts to rehabilitate the aircraft — as well as Boeing’s own reputation — after two fatal accidents within five months left 346 people dead.

Investigations following the crashes revealed Boeing had concealed design flaws in flight control software from both pilots and regulators in a race to get the aircraft certified. 

The flawed anti-stall system, deemed a critical factor in the accidents, has been redesigned and pilots will have to go through more extensive training programmes.

The Federal Aviation Administration last month declared the jet safe to fly and other regulators are expected to follow suit in the coming weeks. 

Michael O’Leary, chief executive of Ryanair — already one of Boeing’s biggest Max customers — said he was “confident that our customers will love these new aircraft”.

At list prices, the order is worth roughly $8bn, but analysts expect the Ryanair boss to have negotiated a steep discount. Normally, aircraft are sold at discounts of about 50 per cent to catalogue prices but the reduction is likely to have been even greater in the current climate.

Even though Ryanair “was never going to buy another aircraft type”, said Rob Stallard, aerospace analyst at Vertical Research Partners, it “all came down to money . . . I think we can safely assume that the price was right for Michael O’Leary”.

The price could have been mitigated by relief on downpayments, on the cost of EU tariffs imposed on Boeing aircraft in the ongoing battle over subsidies and “lots of flexibility on delivery slots”, he said.

Ryanair and Boeing said there had been a “modest reduction in the pricing of this new aircraft order”, which incorporated some of the compensation owed to the airline.

Ryanair’s decision to commit to fleet expansion during one of the industry’s deepest downturns also signals its determination to cement a cost advantage over emerging competitors such as the rapidly growing Wizz Air.

The 737 Max 8200 is based on the core Max 8 variant but will be able to carry roughly eight more revenue-generating passengers. Ryanair said it would start taking delivery of the aircraft from early next year continuing through to December 2024. It brings the carrier’s total order for these larger aircraft to 210. They would be used to replace the older NG variant and were up to 16 per cent more fuel-efficient.

For Boeing, the hope is that the order will spark confidence in the Max, which even before the crisis was lagging behind rival Airbus’s A320 family in net orders.

In total, 4,489 Max single-aisle aircraft have been sold against 7,455 of Airbus’s A320neo variants, according to Cirium, the fleet data specialists. Cirium also notes that slightly more than 1,000 Max orders have been cancelled or judged by Boeing to be at risk of cancellation this year alone. 

Analysts said Ryanair’s order was to be expected, given that the low-cost carrier is one of the world’s largest operators of 737 aircraft and passenger confidence mattered as much to the carrier as to Boeing.

Moreover, the deal was unlikely to deliver a huge cash boost for Boeing, which will owe the airline substantial compensation for delays to delivery of an original order for 135 Max 200 placed in 2014, with aircraft due to enter service in April 2019. 

Boeing has estimated the total extra costs as a result of the accidents and subsequent grounding of the 737 Max could come to at least $20bn.

American Airlines, another large 737 operator, is planning to run its first commercial service using a Max aircraft on December 29 between Miami and New York.

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