Monday, September 8, 2014

A New Class MAX Emerges With Ryan Air

Will the 737 MAX 200 be a one hit wonder, only for Ryan Air, or will other customers follow suit on this 100 airplane MAX order. Ryan Air has ordered 100 737-200's as a new 737 MAX configuration with two hundred seats. Basically, Boeing has pushed around the interior a little, and added one exit door, as an accommodations for eight additional seats within the 737MAX-800 cubic feet of space. Michael O'Leary, Ryan Air's "Chief of Everything", went to Boeing and pleaded for more seats in the the same space for its customized order. The observation is whether others will follow O'Leary's and Boeing's agreement for a 200 seater.

More importantly, others may see an opportunity for increased seat revenue for the same new found Boeing efficiencies on the MAX. A single aisle premium is a 737 -800 with 189 seats. However, eight more seats may straddle density Markets found in China, Asia or the Americas. Expect some order book revisions from the MAX 800 to the the New 200 class 737. Not adding new strength to the 737 Order Que but adding flexibility to a customers inventory.

A current 737-800 MAX order holder might review its fleet passenger dynamics and determine that they could optimize capacity with an additional eleven seats (MAX) over its current 737-800 (189 seat MAX just ordered) on certain routes. They may have ordered 50 787-800 MAX originally, but now would like to convert 20 of its fifty  ordered to the MAX 200.  Which would have a a fleet capacity of an additional 220 seats within its every day operation.

Added Value within the order book is what an Airline would gain. O'Leary is always about added value. After all its a "bus with wings". He is interested in booking passengers on the flight they want and not bumping customers to the next flight out, because of over capacity on that optimal flight departure time for a particular passenger. Eleven more seats will reduce bumping problems. When is enough seats enough? A growing business plan needs options and equipment affords  those option.

That theoretical 50 Max order has now converted from 50 MAX 800's to a split of 30 MAX-800s and 20 Max 200's. This gives an airline juggling options with its inventory of aircraft. Matching the right seat count with the right market demands while keeping its airplane's operational points intact with the same flight characteristics. That would make a case for adding seating flexibility within its fleet.
                                         (Commit /option) 
Ryan Air goes and buys a 100/100 order with Boeing. With last years 175 NG order and the 200 combo order from above, Ryan Air has positioned itself with a flexible inventory of new aircraft no matter what competitors will do. A second consideration is Boeing timeliness, and where Ryan Air
falls into the production que, and how much it has to wait.. Boeing's needs that block of 175-737's ordered last year by Ryan Air as it will fill a production block of time while developing the MAX. It also will give Ryan Air Just-in-time new equipment in a continuous low. There are other NG orders in the factory line-up. Boeing needs another year of NG order product to feel really comfortable for its factory transition to the MAX/NG  duo production slots.  The MAX backlog stands at 2219 confirmed orders at this time. Its about 1000 behind the Airbus NEO. It doesn't take into account the existing backlog of unfilled NG's or Classic A320 types. Over -all aircraft backlog comparisons from the the classic to Max would be a good comparison at this time. There are about 2219 Max and 1850 NG's unfilled on the books. This changes almost every day and does not consider the recent Ryan Air 100 Max order. Adding on that 100 it brings the MAX backlog to 2319. Everyday it seems to change, so these are rule of thumb numbers. Both airplane companies seem to have robust campaigns in the single aisle market.

Today's  Ryan Air order is not a turning point, diminishing Airbus' headstart, but is more of Boeing doing its work with existing customers. Its combined backlog 4,069 single aisle of unfilled sales is an indicator Boeing made its case with its customers. They will have to get its MAX flying, ASAP, and prove in the market who has the the best solution. Ryan Air, though, has opened possibilities of what other airlines may do thinking outside the box. All Ryan Air has to do now, is sell food/treats grab bags at the terminal waiting area for $10, before loading. Buy the ala cart snack box DIY loading with drink and snacks or not. The Ryan Air Kitchenless airplanes can afford a trash can on board for convienient disposal when done eating during your 90 minute flight to somewhere.