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Ryanair Smells a Bargain

Ryanair CEO Michael O'Leary is out bargain-shopping. With both Airbus and Boeing expecting further declines in new jet sales during 2009, the irrepressible Irishman has started talks toward a deal for as many as 400 new single-aisle jets.

O'Leary's done this before. Back in 2002, when Boeing was in the midst of laying off 40,000 people, Ryanair came in with a big order for 100 Boeing 737-800s, with options on another 50. (Ryanair ended up exercising 27 of those options, before negotiating a new deal for 70 more 'Three-Sevens in 2005.)

The official list price on that deal was given at $9.7 billion, but analysts everywhere believed at the time that a hungry Boeing, starved for orders in the wake of September 11th, slashed at least 35 percent off the purchase price. With those bargain-price airplanes, Ryanair was able to grow; it's now Europe's largest low-cost carrier.

So it's probably not surprising to hear that O'Leary's back in the market for jets, not with the global economy in a shambles. What is raising eyebrows, however, is the announcement by O'Leary deputy Michael Cawley that Ryanair will take bids from Airbus as well. Buying from Airbus would be a significant departure: Ryanair now operates 181 Boeing 737s, and has another 143 on order.

in the '90s, Ryanair adopted Southwest Airlines' low-fare model, flying only one type of plane (Boeing 737-800s) with one class of passengers. Over the years, O'Learly himself has been vehemently pro-Boeing, earning the love of workers in Boeing's 737 factory in Renton, Wash., by proclaiming that if "you keep building 'em, we'll keep flying 'em and together we will beat the crap out of Airbus in Europe." (He followed that with a demonstration of Irish folk dancing a la Riverdance, and later picked up and carried a Boeing vice president over to pose with him inside the engine cowling of one of his new planes).

Flying only a single jet model saves airlines a lot of money. It streamlines maintenance and training procedures, and ground crews that have only one type of plane to deal with become more proficient at it, which allows them to turn around planes faster, squeezing more revenue-generating trips each day.

But Cawley told reporters in London that "we're large enough now to run two fleets."

We should know whether Ryanair is really ready to run a split fleet -- or is just threatening to buy Airbus to sweat Boeing for further concessions -- sometime late in 2010.

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