How much does Ryanair Chief Executive Michael O'Leary pay for his Boeing jets? His bare-bones, low-cost airline is one of Boeing's most...
How much does Ryanair Chief Executive Michael O’Leary pay for his Boeing jets?
His bare-bones, low-cost airline is one of Boeing’s most important customers. But Boeing’s prices are one of its best-kept secrets — Airbus would certainly like to know.
Ryanair gave a glimpse of the answer yesterday in an unusual regulatory filing connected to its February order for 70 jets. The papers offer details of Boeing’s commercial jet pricing that are not normally revealed.
O’Leary’s starting point for price negotiations is way below Boeing’s public list price — and he gets deep concessions from there, according to the proxy document provided to shareholders.
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In addition, the deal retroactively applies the newest, biggest discounts to 89 previously ordered jets that Boeing hasn’t yet delivered to Ryanair.
Ryanair, one of the fastest-growing airlines in the world, has a fleet of 89 Renton-built Boeing 737s in service, with another 145 of the jets on firm order and options to buy a further 193. The order placed earlier this year needs shareholder approval in a May 12 vote — hence the proxy filing.
Yesterday’s filing said $51 million is a “basic price” for the 70 Boeing 737-800 airplanes ordered in February, including the engines and some optional features. Ryanair will also pay around $900,000 per aircraft for equipment from third parties that Boeing will install.
That basic price is already discounted between 17 and 27 percent from the public list price of $61.5 million to $69.5 million given on Boeing’s Web site.
However, the filing adds that Boeing granted Ryanair “certain price concessions” in the form of credit and allowances that “will reduce the effective price of each aircraft to Ryanair significantly below the basic price.”
Boeing will also provide a range of support services, and will install fuel-conserving winglets at no extra cost.
The document gives one further clue to Ryanair’s price tag: It states that 454 million euros (or $593 million) will be required to fund the 29 jets to be delivered between now and March 2006, or about $20 million per aircraft.
And elsewhere it says 30 percent of the price is required in advance of delivery, suggesting the $593 million will pay the remaining 70 percent.
That works out to a bargain price tag on Ryanair’s jets of about $29 million.
For a hard-driving negotiator like O’Leary, $29 million for a 737-800 — less than half the public list price — is “not out of the realm of imagination,” said industry analyst Byron Callan of Merrill Lynch.
Callan said he’d heard of such prices being offered in the recent Iberia sales campaign that Boeing lost to Airbus.
“Even at these price levels, I still have to believe Boeing is making money,” Callan said.
To persuade shareholders to approve the purchase, the filing gives the rationale for picking the 737 over Airbus’ A320: Boeing offered the best price; its jet has lower per-seat operating costs; and the airline already operates an all-Boeing fleet.
Dominic Gates: 206-464-2963 or email@example.com