July 16, 2019 / 6:30 AM / a month ago

Ryanair halves 2020 growth plans on Boeing MAX delays

DUBLIN (Reuters) - Ryanair (RYA.I) has halved its growth plans for next year due to delays in deliveries of Boeing’s (BA.N) grounded 737 MAX jet, lifting shares in rival European airlines which had feared a surge in new capacity would drag down ticket prices.

Europe’s largest budget airline said it would start talks with airports and unions about downsizing or closing some operations from November 2019 to adjust for the slower growth.

Ryanair is one of Boeing’s biggest customers and was due to have 58 737 MAX planes in time for its 2020 summer season. On Tuesday, it said it now expected to have received 30 by then.

The aircraft was grounded in March after crashes in Ethiopia and Indonesia that killed a total of 346 people, and Boeing is working on a software fix that people familiar with the matter have said it hopes to present to regulators in September.

Ryanair Chief Executive Michael O’Leary said it was hard to predict what would happen, but the airline was assuming the MAX might not return to service until as late as December, pushing its first deliveries of the jet back to January or February.

As Ryanair can only process 6-8 new planes per month and does not take deliveries during its peak June-August months, the company is making plans on the basis of having 30 MAX planes available for the summer, O’Leary said in a statement.

“This number could rise or fall further, depending on when the B737 MAX actually returns to flight services,” he said.

As a result, Ryanair expects to fly 157 million passengers in the year to March 2021, cutting its growth plans from 10 million additional passengers to 5 million, he said.

“While it is disappointing that we have delays and disappointing that the growth for next year will be slower than ... we had originally planned, we remain confident in the aircraft. We still think it is a great product,” O’Leary told investors in a conference call.

“As soon as we can reasonably organise these deliveries with Boeing we would intend to take all of the 135 firm aircraft we have ordered over the next five years,” he said. He did not mention the additional 75 options Ryanair has for MAX planes.

FILE PHOTO: A Ryanair commercial passenger jet takes off in Blagnac near Toulouse, France, May 29, 2019. REUTERS/Regis Duvignau

RIVAL STOCKS RISE

Shares in Ryanair, which had warned journalists of the possible reduction in growth plans at a briefing last week, were up 2% at 1255 GMT, with Davy Stockbrokers describing the new forecast as “prudent.”

Shares of large European rivals, most of which have less exposure to MAX delays, posted even bigger gains amid expectations that Ryanair’s cuts would help to address overcapacity in Europe’s saturated airline market.

Shares in British Airways owner IAG (ICAG.L), Lufthansa (LHAG.DE) and KLM Air France (AIRF.PA) were all up by around 3%, while easyJet (EZJ.L) was up 4%.

European rivals Norwegian Air Shuttle (NWC.OL), Icelandair (ICEAIR.IC) and Turkish Airlines have also had to ground MAX planes, although their groundings have been dwarfed by those at U.S. airlines such as Southwest (LUV.N), American Airlines, and United Airlines.

O’Leary said Ryanair had no plans to market the new 737 MAX planes any differently from its current 737 fleet, saying he expected the planes would be “warmly welcomed” by customers.

FILE PHOTO: Passengers wait to board a Ryanair flight at Gatwick Airport in London, Britain. Aug 23, 2018. REUTERS/Hannah McKay

He said he knew nothing about media reports that a MAX plane due for delivery to Ryanair had been repainted to replace “737 MAX” with “737-8200”, a technical name Boeing has used for a version of the MAX designed specifically for Ryanair.

“We don’t know where the pictures came from, nothing to do with us,” O’Leary said. Boeing has denied it has any plans to rebrand the MAX.

Additional reporting by Noor Zainab Hussain in Bengaluru; Editing by Kate Holton and Mark Potter

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