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Boeing Signs Landmark $15.6 Billion Order With Ryanair

Ian Waldie | Getty Images News | Getty Images

Ryanair announced a $15.6 billion order for 175 passenger jets from Boeing on Tuesday in a boost to the struggling planemaker that will allow the Irish airline to consolidate its position as Europe's dominant low-cost carrier.

The order for the current generation 737NGs keeps Ryanair as one of the few remaining all-Boeing airlines, after Lion Air of Indonesia on Monday dealt a blow to Boeing by switching to rival Airbus in a $24 billion mega-order.

(Read more: Airbus Grabs Huge Order From Longtime Boeing Customer)

The deal, signed in New York on Tuesday, will see Ryanair increase its fleet to 400 planes from 300 at present, as old planes are retired. Capacity will grow by 25 percent to 100 million passengers per year by 2018, Ryanair said.

Ryanair chief executive Michael O'Leary, who has developed a reputation for securing bargain aircraft orders during industry slumps, declined to say how much of a discount he secured for the order, but he said Boeing's struggles with the 787 had created an opportunity for both sides.

"This deal embeds our cost advantage and pricing advantage over our European competitors and they all understand that," O'Leary told Reuters in a telephone interview.

"Hopefully it will help refocus people's minds on the fact that Boeing continues to deliver great aircraft and is growing strongly, rather than a minor issue on the 787," he said.

The industry benchmark 737-800 model is worth $89.1 million at list prices, but large orders attract steep discounts and industry appraisers value the plane closer to $40 million.

Reuters reported exclusively in late January that Ryanair was closing on a deal for at least 150 737NG passenger jets to be completed within weeks. Ryanair denied the story at the time.

The 737NG family includes the -600, -700, -800 and -900 series of Boeing's 737 short-to-medium range, narrow body jet airliners. Its main competition is the Airbus A320.

Boeing Boost

The order for 737s delivers a timely boost to Boeing, which last week won U.S. approval for test flights for its new 787 Dreamliner, which has been grounded for two months after batteries burned on two of the jets in January.

The U.S. Federal Aviation Administration last week approved Boeing's plan for testing a revamped battery system for the plane, including tests Boeing had helped developed but not previously used.

Boeing predicted the plane would be back in service in weeks, not months, but its biggest 787 customer, All Nippon Airways, said that prediction was too uncertain for it to base planning on.

The Ryanair deal will also provide Boeing with a smooth transition to its new 737 Max aircraft, scheduled to enter service in 2017.

Boeing and Airbus are upgrading their medium-haul passenger models to offer about 15 percent fuel savings from the middle of the decade, raising the prospect of bargains on the outgoing models to help manufacturers ensure steady production.

O'Leary said the fact that the 737 provided nine more seats than the A320, which is due to be revamped with fuel efficient engines in 2016, was more important to Ryanair than any possible fuel savings.

The Ryanair deal comes a day after Airbus scored a deal for 234 single-aisle passenger planes with low-cost Indonesian carrier Lion Air, which had been one of Boeing's fastest growing customers.

Ryanair shares were up 2.6 percent in trade on Tuesday.

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