June 21, 2011 4:27 pm

O’Leary slams Boeing 737 ‘confusion’

Michael O’Leary, chief executive of Ryanair and one of Boeing’s biggest 737 customers, has said the US aerospace group appears “confused” over what to do with its best-selling narrow-body jet in response to the decision by Airbus to re-engine the rival A320.

The two aircraft makers’ dominance of the 100-200 seat segment, the biggest part of the commercial jet market, is coming to an end with at least three companies from China, Canada and Russia set to introduce rival offerings in the next five years.

That threat was hammered home on Tuesday when Ryanair, Europe’s largest low-cost airline, signed a co-operation agreement with China’s Comac. The deal will see the airline advise on the development of a 200-seat version of the company’s C919 aircraft, a 147-seat passenger jet which is due to enter into service with Chinese airlines in 2016.

Speaking to the Financial Times after the ceremony in Paris, Mr O’Leary said Boeing’s indecision would result in airlines holding off from ordering more 737s, until it has clarified its position, which it has said it will do by early next year.

“Boeing would seem to be confused. They seem to be in trouble about whether to re-engine the 737 or redesign it altogether. Until they have made up their mind, I think airlines will be reluctant to commit to the 737,” he said.

Mr O’Leary said Ryanair would discuss an order for 200 aircraft with both Comac and Boeing and would buy Comac’s bigger jet, which could be ready by 2018, if it beat Boeing’s offering on operating costs. The move would end Boeing’s exclusive supply relationship with Ryanair, which operates one of the largest fleets of 737s in the world, with more than 300 aircraft.

“If Comac can get the costs right, then we will certainly place a big order with them,” he said. “We are now committed to Comac in the same way we are committed to Boeing.” After growing rapidly for the last 15 years, Ryanair is putting the brakes on its expansion. Mr O’Leary said it was likely to place an order in 2014 or 2015.

Boeing is coming under pressure from airlines to make a decision about whether to follow Airbus and put new engines on the 737 or go for the higher-risk, more costly approach of an all-new design.

Airbus’s re-engined A320, dubbed the Neo, has proved a huge hit as it offers fuel savings of 15 per cent over the current model at a time when airlines are facing rising fuel costs.

The European aircraft maker announced deals for more than 100 A320 Neos at the Paris Air Show on Tuesday, bringing the total number of commitments to 594 since it was launched at the end of last year. The aircraft is due to enter service in October 2015.

Jim Albaugh, head of Boeing’s commercial aircraft unit, said he was taking the challenge of the new entrants “very seriously” but dismissed the threat from the A320 Neo to the current generation of 737s, saying the two were now “on par”.

Tom Enders, Airbus chief executive, who described Mr Albaugh’s claim as “a joke” was backed by Mr O’Leary, who urged Boeing to go for a new aircraft. “I don’t think re-engining is sufficient response to the Neo programme.”

He said Ryanair would look to buy both Comac jets and an all-new Boeing aircraft to encourage competition between the two companies.

Forecasts see demand for close to 25,000 new jets in the 100-200 seat range, equal to 70 per cent of jet deliveries and worth $2,000bn, over the next two decades.

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