Ryanair pressures Boeing with threat to cancel 737 orders

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Irish budget carrier Ryanair is threatening to cancel or defer aircraft orders from Boeing, and temporarily stem its growth, if it fails to secure a fleet-renewal agreement this year.

The airline made the threat as it posted an 80% increase in after-tax profit, to €387 million ($571 million), for the half-year.

Ryanair chief Michael O'Leary says the airline has made "little progress" in its discussions with the airframer over a potential order for 200 aircraft for deliveries in 2013-16.

"We won't continue these discussions indefinitely and have signalled to Boeing that if they are not completed before the year end, then Ryanair will end its relationship with Boeing and confirm a series of order deferrals and cancellations," he says.

"We see no point in continuing to grow rapidly in a declining yield environment, where our main aircraft partner is unwilling to play its part in our cost-reduction programme by passing on some of the enormous savings which Boeing has enjoyed both from suppliers and more efficient manufacturing in recent years."

O'Leary had previously hinted, during a recent briefing in London, that he was prepared to curb the airline's expansion for a couple of years. He has not indicated how many aircraft in its backlog could be affected, but the airline still has some 100 Boeing 737-800s on firm order and options covering dozens more.

"We would prefer to grow, but if Boeing doesn't share our vision, then I believe that Ryanair should change course before the end of this fiscal year and manage the airline over the next three years to maximise cash for distribution to shareholders," says O'Leary.

"If we cannot invest our surplus cash efficiently in new aircraft, then we should distribute it to shareholders."

Ryanair's half-year passenger numbers were up 15% to 36 million, but revenue declined by 2% to €1.8 billion as average fares fell 17%.

The airline expects this slide in fares to reach 20% during the third and fourth quarters, and that it will make a loss during both quarters. But it is maintaining its full-year guidance, adding that the carrier will be "substantially profitable" - at the lower end of the €200-300 million range.

Ryanair's half-year profit figure excludes an exceptional €13.5 million impairment on its shareholding in Irish flag-carrier Aer Lingus.