December 17, 2009

Ryanair Threatens To Back Out Of Boeing Deal

Ryanair and Boeing appear to be playing chicken with one another as they negotiate for the purchase of 200 new aircraft.

Boeing will soon see if the Irish airline Ryanair plans to follow through with the threat to back out of the purchase, or if it is only an attempt to gain leverage in the deal, reported BBC.

The final decision on the purchase will be made at a Ryanair board meeting this Thursday, just hours after the maiden flight of Boeing's much delayed 787 Dreamliner.

Ryanair got plenty of press in 2001, after the September 11 attacks on the U.S. when they signed a huge order with Boeing to buy up many of its jets even though the industry was collapsing.

Though the particulars of such commercial deals are usually kept under tight wraps, it is widely believed that the airline got such a great deal that Boeing was practically giving its planes away.

However, Boeing is not letting go of its aircraft so cheaply this time. They are asking Ryanair for a good price.

No one knows which company is truly bluffing, and Boeing is not dropping any hints on what is being said behind closed doors.

"We never discuss negotiations while those negotiations are ongoing," says Andrew Davies, a spokesman for Boeing's commercial aircraft division.

Ryanair, on the other hand, has not been slow to acknowledge that Boeings asking price may have altered their plans.

"They changed some of the terms," insists Ryanair's communications director, Stephen McNamara.

Chief executive of Ryanair Michael O'Leary threatened to abandon the deal just last week.

"We're going to make a final decision at the board meeting next Thursday. Unless there's some change in their position over the next week, it's off," he insisted.

O'Leary is notorious for driving hard bargains. The operators of regional airports live in fear that the chief executive will withdraw his jets from their hub, which would result in dozens of job losses.

The decision will not be an easy one for either party. If Ryanair walks away from the deal, Boeing stands to lose much. But, at the same time, Boeing cannot afford to give away its aircrafts.

In addition, Ryanair has flown Boeing jets exclusively since 1994 in an effort to keep costs down, so a change would involve a major shift for Europe's most successful low-cost carrier.

While O'Leary has mentioned the possibility of going with Airbus, Boeing does not seem to be biting the bait.

Should Ryanair back out of the 200-jet deal, the two companies are still likely to do business again in the future.

O'Leary, is playing with the idea of long-haul flights, and as one of Boeing's best customers, he has probably been keeping his eye on the test flight of the U.S. company's new fuel-efficient 787 Dreamliner.


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