Airbus Faces Uncertain Future as Ryanair and US Air Force Consider Big Orders

Strategic Insights -

Ryanair's chief executive Michael O'Leary is in talks with both Airbus and Boeing for an order of 200 planes, but he has made it clear that he is willing to wait for a significant price cut. Meanwhile, the US House of Representatives' appropriations subcommittee on defense is calling for the Pentagon to consider splitting a £27bn aerial refueling tanker contract between Boeing and a rival team led by Airbus parent group EADS and American firm Northrop Grumman.

Key Takeaways:

  • Ryanair is in talks with both Airbus and Boeing for an order of 200 planes, but has not entered advanced negotiations with either manufacturer.
  • The airline's CEO, Michael O'Leary, believes it is possible to negotiate a 50% discount on the planes, which would bring the order price down to £5bn.
  • Airbus has already declined to enter a bidding contest with Boeing, citing concerns over the scale of discounts being sought by Ryanair.
  • The US House of Representatives' appropriations subcommittee on defense is calling for the Pentagon to consider splitting a £27bn aerial refueling tanker contract between Boeing and a rival team led by Airbus parent group EADS and American firm Northrop Grumman.
  • The proposed contract would see the tanker wings built at Airbus's Broughton plant in the UK before being shipped to Mobile, Alabama, where the aircraft would be assembled.
  • Congressman John Murtha is trying to convince Defense Secretary Robert Gates to consider the two rival aircraft as replacement tankers.
  • The Pentagon has previously said that contracting only one supplier would be the cheapest option for US taxpayers, but Murtha believes that splitting the contract could lead to greater competition and better value for money.

Statistics:

  • The value of the proposed order for 200 planes could be as much as £10bn (£50m x 200).
  • The value of the aerial refueling tanker contract being considered is £27bn.
  • 179 planes are to be rebuilt as replacements for the aging US tanker fleet under the current contract.
  • The budget for the new tanker fleet is to be replaced by a consortium led by EADS and Northrop Grumman.

Sources:

  • "Ryanair to consider rival Airbus and Boeing for massive deal", The Daily Post, February 2011.
  • "US House lawmakers want to split $27 bn in aerial refueling tanker contract", Sadvimedia, February 2011.
  • "Pentagon has already tried to split tankers deal", The Daily Mail, January 2011.
  • "Air Force lowers Northrop Grumman - EADS tanker proposal bid price, drops Sikorsky", Defence News, November 2010.