Southwest Airlines & Ryanair Eye Up New 737X
Boeing Not Short Of Candidates To Launch Successor To Next Generation 737
Question Of Timing Still To Be Decided
As Boeing draws closer to its year end decision on whether it will re-engine, replace or do nothing on the current Next Generation 737 family, the airframer will keenly be looking at two of its biggest customers sat on either side of the Atlantic.
While Southwest Airlines evaluates the feasibility of inducting larger 737-800s into its fleet, Ryanair has made it clear that its back in the market to buy – but not necessarily buy what’s available today, more likely it will prod Boeing towards the replacement 737X.
Ryanair Boeing 737-800 climbs out of Boeing Field
Image courtesy of Rick Schlamp
The Advanced 737 Product Development team is clearly a lot farther along than many give it credit for and there is a very big chance that Ryanair, not Southwest Airlines will make a splash first for the 737X.
Unlike Southwest Airlines in the United States, Ryanair is the biggest airline in Europe (and arguably most profitable there too) - that accolade brings with it a more greater sense of urgency to build its fleet, retire older constituents and eyeball something better all in one fell swoop.
“All other things being equal, if we’re still generating this amount of cash and we haven’t found any acquisition or aircraft acquisition for it, then we would certainly consider a second dividend by about the end of 2013,” stated CEO Michael O’Leary in the FT.
“But if I was a shareholder I wouldn’t be banking on that yet.“
Having walked away from a deal to procure as many as 200 new 737-800s last fall, Ryanair is just as much in the driving seat for a replacement 737 as is Southwest Airlines, despite still have some 60-odd units yet to be delivered between now and 2012. As Boeing ups 737 production to around 35 units by 2012 and with the possibility of another rate rise, Ryanair can step in and acquire additional 737s without the risk limited supplies bumping up prices – in particular, the airline has not completely ruled out the 737-900ER featuring in its fleet given the regulatory issues in adding more seats (and less lavatories) on its current 737-800 fleet.
As Boeing looks more and more likely to pass over the re-engine strategy on the 737 in favour of something all new, Ryanair (like Southwest Airlines) will be vying for launch customer status – not just to secure early delivery positions but to extract as much financial concessions as is possible given the huge number of jets the airline needs for growth and replacement of its current fleet.
So who’ll bite first?
Boeing cannot afford to irk either Ryanair or Southwest Airlines. And with the near certainty that Airbus would be forced to scrap their A320 re-engine move if Boeing elects to go with a clean sheet design, the impetus to get on board the 737X will be hugely compelling.
Airbus may have spurned Ryanair’s advances, but the fact of the matter is that the 737 simply works better for Ryanair and it was inevitable that they’d come back to Boeing and make their purchase.
A number of reasons stick out why Airbus was never a serious contender:
• A320 lacks capacity and range, A321 lacks range in contrast to the 737-800
• Winglet-equipped A320/A321s still lack range in contrast to the 737-800
• Re-engined versions not worth the cost for fleet rollover – limited shelf life
• No guarantee Airbus would commit to new design so soon after re-engined A320
Coupled with Ryanair’s preference for CFM International, the LEAP-X engine will almost certainly feature ahead of the rival Pratt & Whitney GTF engine, largely as that latter engine does not yet have a core to match the 30,000lbs thrust capability that CFM has from the outset.
If Boeing sits on the sidelines after Airbus launches the re-engined A320 program, airlines will not be quick to sign up to the latter – the price premium, single-digit fuel burn improvement and limited fleet compatibility runs a far greater risk of creating a new oddball family of jets that will be made obsolete within a decade.
Critically, airlines seeing a lack of Boeing movement to follow suit will further reinforce the view that doing nothing has greater chances of the 737X being realised, leapfrogging Airbus by a wide margin and it is clear from the remarks made by CFO James Bell that customers aren’t as keen on the “new engine/old airframe” combination.
As far as potential candidates go, Boeing has more who are willing to step up for the 737X than Airbus does at present for the A320 re-engine option. For Airbus, constrained by billions being continually lost on the A400M, A380 and still yet to peak on R&D costs for the soon-to-be-delayed A350XWB, the appeal for the re-engined A320 will remain less than brisk.
The real challenge though lies with Boeing. With the 747-8F and 787-8 still no closer to service entry and a respectable backlog on its 737, just how long can it resist the pressure from two of its biggest customers that have said more times than not that they want something new. Aiming for service entry before the end of the decade is achievable, despite the recent spate of new airplane programs having a knack for being delayed and with CFM International all too keen to secure its monopolistic status as well as give Boeing the more powerful LEAP-X engine before anyone else, the CFM-Boeing recipe has a great chance of being continued. Quite where that leaves Pratt & Whitney is debatable – particularly as the Irkut MC-21 and Mitsubishi MRJ are at best, niche products with limited longevity.
As for the CSeries, well, need we say more - the airplane is a market disaster by any metric.
Expect Boeing to defer its year end decision as it works to finalise with airlines its 737X. Airbus may be caught short all over again with the re-engined A320, just as the A330-derived A350 was against the 787.
The rest as they say, is history.
