European Customer Ryanair being takes criticism for stalling price discussions and delivery delays
A management reset may be in order at The Boeing Company (BA), beliefs the CEO of Irish budget airline Ryanair Holdings PLC (RYAOF).
After a succession of supply delays and conflicts over price negotiations have muddied the commercial relationship of the two businesses.
CONCLUSIONS AND RECOMMENDATIONS:
Ryanair CEO Michael O’Leary suggested that Boeing’s management needs a shakeup following a string of delivery delays and failed price discussions with the business.
Ryanair canceled talks to acquire up to 250 MAX 10 jets in September 2021 after price discussions with Boeing went down.
Boeing’s 737 MAX 10 and 787 Dreamliner have endured substantial delivery delays owing to certification and production concerns.
Faster-than-expected deliveries of Boeing’s MAX 10 and Dreamliner might significantly surge the company’s share price.
Ryanair Chief Executive Michael O’Leary attacked the aerospace company’s management during the airline’s quarterly results conference call on Monday, May 16, alleging that Boeing had lost its path. “At the present, we believe Boeing management is running about like headless chickens, not able to sell aircraft, and then even the aircraft they deliver, they’re not able to deliver them on schedule,” O’Leary told analysts, according to a FactSet transcript reported by MarketWatch.
“Boeing needs a management reset, definitely on the civilian aircraft side,” O’Leary noted.
Pricing Negotiations Stall:
Ryanair is one of Boeing’s top European clients. It has acquired several of its narrow-body 737 MAX planes that it has resorted to for grabbing market share from competitors still recovering from the epidemic. The Ireland-based low-cost airline had also been discussing acquiring up to 250 of Boeing’s MAX 10 jets, possibly for $33 billion. Still, talks ended last September when price negotiations broke down.
O’Leary indicated that he was open to continuing conversations with Boeing for a new MAX 10 purchase but had not heard anything from the business.
Delivery Woes Continue
Deliveries of the 737 MAX 10, which can seat 230 people, have suffered significant delays owing to more strict certification from authorities after two tragic MAX disasters in 2018 and 2019. Meanwhile, the company’s 787 Dreamliner handovers have been stopped since May 2021 after the Federal Aviation Administration (FAA) voiced concerns about multiple production difficulties connected to the wide-body plane’s airframe. However, numerous Wall Street analysts anticipate Boeing to start some Dreamliner deliveries as early as this quarter.
Repercussions for Financial Backers:
O’Leary’s criticism of Boeing’s management comes at a key moment for the aircraft builder as it strives to bounce back from three years of depleted global travel demand and continuing delivery troubles. Unflattering comments from Boeing’s major clients can inspire other would-be jet purchasers to choose the company’s main competitor Airbus SE (EADSY), as an alternative. Although France-based Airbus has had its delivery challenges, it has delivered 188 aircraft this year compared to Boeing’s.
However, faster-than-anticipated deliveries of Boeing’s MAX 10 and Dreamliner might see a strong increase in the company’s share price. Year to date (YTD), Boeing stock has plummeted 38.38%, more than twice the decline of the S&P 500 Index, which has lost 15.91% during the same time.
After O’Leary’s statements on May 16, Boeing’s shares recorded a 2.48% dip for the day to $124.05. In pre-market trading on May 17, the stock recouped some of its losses to $126.87.
Disclosure:
The author had no holdings in the securities above at the time of writing.
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