Boeing’s
problems may soon start being felt by travelers in their wallets.
Delays to deliveries of
Boeing
MAX aircraft could lead to higher airfares for passengers and some flights being cut this summer, according to Ryanair’s CEO Michael O’Leary.
While he’s referring to fares in Europe,
Ryanair
is one of Boeing’s largest customers and the warning could point to a similar dynamic in the U.S. That’s potentially bad news for passengers but also poses problems for discount airlines. The low-cost business model, and intense competition in the U.S. doesn’t really allow them to hike fares–as low fares is what differentiates them from the larger carriers, such as
United Airlines,
American Airlines
and
Delta Air Lines.
Southwest Airlines
and
Alaska Air
are among the low-cost names heavily exposed to Boeing but even those reliant on European planemaker
Airbus
—including
JetBlue Airways
and
Spirit Airlines
—also face supply constraints.
Ryanair has such a dominant position in Europe that it is able to hike fares without significantly jeopardizing market share.
Michael O’Leary said ticket prices may rise up to 10% as Boeing delivery delays may constrain the Irish low-cost carrier’s capacity growth in Europe. Ryanair is due a delivery of 57 Boeing Max 8-200 planes by March, but O’Leary said he expects to receive between 40 and 45 aircraft, or even fewer by the peak summer season, the BBC reported Monday.
“We’re doing our budgets based on a fare increase of 5-10%, which to me feels reasonable,” he said, according to the Times newspaper. “If capacity was growing, I think fares would be falling.”
The summer schedule is predicated on Ryanair getting 50 aircraft from Boeing. “If we only get 40 by about the end of March, I think we have to start announcing some minor schedule cuts,” he said at a press conference Friday.
A Boeing spokesperson said in an emailed statement to Barron’s: “We are communicating with customers that some delivery schedules may change as we take the necessary time to make sure that every airplane we deliver is high quality and meets all customer and regulatory requirements. We deeply regret the impact this is having on our valued customer Ryanair.”
The industry has been plagued by supply constraints in recent years but the issues have intensified in recent months. The Federal Aviation Administration halted Boeing’s planned production expansion for its MAX family of jets after a door panel blew off a MAX 9 plane in midair during an
Alaska Airlines
flight in January.
The planemaker’s MAX 7 and MAX 10 jets are yet to be certified by the FAA, and Boeing’s troubles have increased uncertainty around the timeline.
Ryanair has been very vocal about the impacts of Boeing’s issues on its aggressive growth plans–and it’s going to hit those planning to travel around Europe this summer.
Write to Callum Keown at callum.keown@barrons.com
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