(Bloomberg) — This year’s biggest jetliner deal signals there’s a growing sense of optimism that travel demand will come roaring back from a historic collapse once coronavirus vaccines are widely available.
Betting that a recovery is on the way, Ryanair Holdings Plc ordered 75 high-density versions of Boeing Co.’s 737 Max in a transaction valued at about $7 billion, said Ryanair Chief Executive Officer Michael O’Leary. As rivals shrink fleets and postpone aircraft purchases, Europe’s largest budget carrier sees an opportunity and is accelerating delivery plans so that it takes all of its 210 Max jets on order by December 2024.
“Travel is going to snap back very strongly,” O’Leary said Thursday in a joint interview with Boeing CEO Dave Calhoun on Bloomberg TV. “This is an order not for next summer. This is for the next five years, the next decade across Europe.”
The deal is a breakthrough for Boeing as it works to bring back the Max after a 20-month grounding prompted by two crashes that killed 346 people. With the plane poised to start flying again after intense scrutiny by global regulators, Ryanair is providing a crucial boost to Boeing’s plans to ramp up work at its 737 factory near Seattle while also starting to clear an inventory of about 450 Max jets that were built during the grounding.
“The forecast for depleting that inventory is roughly a two-year time frame,” Calhoun said. “We are confident that can be done.”
Boeing climbed 1.6% in premarket trading Friday in New York. That added to a 6% surge Thursday that put the stock at its highest price since early March, just before the virus forced nations to seal their borders. Ryanair advanced 4.3% Friday afternoon in Dublin, adding to a 2.7% gain the day before.
Any airline recovery will come in the wake of an increasingly grim winter travel outlook. As Boeing and Ryanair were touting the coming rebound, Delta Air Lines Inc. warned that it may burn more cash than expected this quarter while Southwest Airlines Co. told more than 6,800 employees that their jobs are at risk in early 2021.
“We all know we’ve got a rough couple of months ahead of us,” Calhoun said. “But that vaccine distribution will change the psychology of the flying public.”
As bookings start to rebound ahead of the summer holiday season in the U.S., “airlines will want to re-establish their leading competitive positions,” he said. “So that usually results in orders.”
Regulators in the U.S., Europe and Brazil have endorsed software revisions and a new pilot training course for Boeing’s best-selling jet. Commercial flights are set to restart next week, with Brazil’s Gol Linhas Aereas Inteligentes SA planning service on Dec. 10. United Airlines Holdings Inc. confirmed that it would take the first post-grounding delivery of the Max.
Ryanair’s commitment gives new sales momentum to Boeing, which had been losing share to rival Airbus SE in the crucial market for single-aisle jets even before the Max