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Ryanair’s Chinese takeaway

c919Ryanair is not everyone’s favourite company, but it should be congratulated on the announcement that it plans to work with Chinese aircraft manufacturer, Comac, to develop a new aircraft type.
The Irish airline company is living embodiment that “low-cost airlines fly Boeings” – a marketing slogan dreamed-up by the boys in Seattle to corner the low-cost market. The three biggest low-cost airlines at the time (Southwest, easyJet and Ryanair) certainly gave Boeing all the ammunition it needed – as they all operated the 737 family exclusively. This was the case until easyJet first broke the cycle in 2002 with a big order from Airbus that has underpinned the European company’s advancement in the sector.

Ryanair, realising that its Boeing-only fleet severely hampered its negotiating position for expensive new aircraft, withdrew from all discussions with Boeing last year. This was initially perceived as  a negotiating ploy, but the Comac announcement puts that decision in a different light – and it would have profound implications for the big two manufacturers.

For years, airlines have been hamstrung by the reluctance of Boeing and Airbus to develop a successor to the 737 and A320 families of narrow-body aircraft. These are mostly used for carrying 150-180 people on short distances, which is why they are particularly beloved of the big low-cost airlines with their short flights. Despite the economic and environmental pressure to produce a new aircraft type that allows airlines to better deal with the reality of oil at $120 per barrel, Toulouse and Seattle have steadfastly refused to play ball.

Economically, that stance makes sense. Developing an entire new family of aircraft is a lengthy ordeal that is fraught with operational, financial and reputational risk. Boeing and Airbus have both had their fair share of new-product disasters recently; experiences from the A380 superjumbo to the 787 Dreamliner mean both companies approach the develop of new aircraft types looking like a recalcitrant schoolboy being dragged to school after the holidays.

After years of amortising the development costs of their short-haul offerings, both Airbus and Boeing are making good profits from running the production lines for the 737 and A320. With no apparent move from the other side of this cosy duopoly, this could continue to do this for years; which is what worries the airlines.

No amount of private or public pressure seems to have had an impact. easyJet attempted to embarrass the big two into making a move in 2007 when it produced its ecoJet concept – a radically different design but based wholly on technology already in the pipeline. It could have flown within five years given a strong enough commitment.

But with Boeing and Airbus resembling the (un)wise monkeys, the market needed a disruptive third force to make the move first. That is why Ryanair’s deal with Comac could be so exciting. It has sensibly given itself five years to develop a new aircraft that can seat up to 200 passengers and would take advantage of much of the new technology that is available.

If successful, Ryanair gets the economic advantage of being the launch customer of a new fuel-efficient aircraft type. Comac immediately forces itself into the reckoning as a global player.

The pressure is now on Boeing to react. Does it re-open negotiations with Ryanair at a lower price? Or respond to market forces by developing a new generation of short-haul aircraft which Airbus would be forced to copy. In communications terms, there are implications for both Boeing and Airbus – the risk is that they begin to look slow-footed and behemoths of the 20th century, punting old-school planes more suited to 1995 than 2015.

Not for the first time, Ryanair has managed to wrong-foot the big boys.

Toby Nicol

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