‘I don’t need cash, but Boeing should pay for 737 Max delivery delays’: Ryanair CEO

‘I don’t need cash, but Boeing should pay for 737 Max delivery delays’: Ryanair CEO

Aviation

Ryanair CEO Michael O’Leary told CNBC on Monday he is confident that Boeing’s grounded 737 Maxes will resume flights this summer. But he said the grounding after two deadly crashes has hurt business.

Europe’s largest discount airline, which ordered 135 Max 200 models with the option for 75 more, had been expecting to receive its first five between April and June but now expects them to be flying by November.

For the airline, the addition of 737 Max jets had been projected to have added 1 million new passengers this summer alone.

“We’re having a discussion with Boeing” about getting financial compensation for the delays, O’Leary said on “Squawk Box.” “I don’t need cash,” he added, saying he wants movement on pricing. CFO Neil Sorahan told Reuters they plan to discuss “modest compensation.”

Boeing’s fleet of Maxes was grounded worldwide in March after the second crash in five months involving the model. The crashes in Indonesia and Ethiopia killed a combined 346 people. Anti-stall software is suspected in the crashes.

The Federal Aviation Administration has come under fire as people questioned the agency’s oversight. The FAA’s internal probe of the 737 Max approval process reportedly found senior agency officials failed to review crucial assessments of the flight-control system.

The 737 Max is touted for its extra seating room and ability to cut down on fuel usage, making the model more appealing for Ryanair, which is known for its small seats and costly amenities.

The Max seating would make it “ridiculously roomy,” O’Leary said.

The company blamed the Max grounding and delivery delays for its profit warning.

O’Leary said expects the 737 Max to be back in the air at airlines across the U.S. in June or July. “Ultimately, we have great confidence in Boeing and the FAA.”

Ryanair shares dive as profits hit 4-year low

Shares of Ryanair that trade in the U.S. were down 1.6% Monday morning.

Ryanair shares tumbled nearly 5% after the airline reported its weakest annual profit in four years and said its earnings may suffer for the next couple of years due to continually low fares.

However, chief executive Michael O’Leary said shareholders should expect this and said fares should rise after continued consolidation in the European aviation market.

He also said Ryanair is well-placed for what he called “attritional fare wars” as the airline has “the lowest cost base”.

“We expect further consolidation and airline failures in winter 2019 and again into 2020 due to over-capacity, weaker fares, and higher oil prices, particularly among those airlines who are significanly unhedged or unable to hedge,” Mr O’Leary said.

Ryanair shares fell as much as 6%, before eventually closing down nearly 5%, after the airline reported a 29% drop in annual after-tax profit to €1.02bn.

That figure fell within the company’s guidance range.

However, it was at the lower end of guidance and Ryanair had already lowered its 2018/’19 profit target twice since last October.

Revenue for the 12 months to the end of March rose 6% to €7.6bn, strongly helped by a 19% jump in ancillary revenues.

Ryanair’s average air fares fell 6% during the year, but group passenger numbers grew 9% to 142 million people.

Ryanair’s share price has dropped more than 33% in the past 12 months; about 10 percentage points more than that of Aer Lingus-owner IAG and nearly the same amount less than UK rival EasyJet.

For its current year, Ryanair is guiding “broadly flat” group profits of between €750m and €950m.

It said first half bookings are “slightly ahead” year-on-year, but fares are lower.

It said it has zero visibility for the second half of its current financial year and expects its costs this year to increase as its fuel bill jumps by another €460m.

Davy said it will lower its 2019/2020 profit guidance for Ryanair by around 9% to approximately €890m, but suggested Ryanair has hit its nadir with its latest annual performance.

Ryanair has also expressed confidence that a grounding of Boeing’s controversial 737-Max aircraft will be lifted in North America in June or July and in Europe around August.

Regulators meet in Texas this week to determine whether the aircraft – involved in two fatal crashes last October and in March – will return.

The meeting comes amid new revelations about problems relating to software used to train pilots of the aircraft.

Mr O’Leary said the disruption had been an “inconvenience” to Ryanair, meaning the airline carried around one million passengers less than planned.

Ryanair has 200 737-Max aircraft on order; 44 of which are due for delivery next winter. The airline has delayed the delivery of the first five to October or November.

“We continue to have utmost confidence in these aircraft which have 4% more seats, are 16% more fuel efficient and generate 40% lower noise emissions,” Mr O’Leary said, adding that use of the 737-Max will deliver “significant unit cost savings for the next five years”.

Ryanair’s board has also approved a €700m share buyback programme, due to commence this week and to run over the next 9-12 months.

It will bring to almost €7bn the amount returned to shareholders since 2008.