A management reset may be in order at The Boeing Company (BA), contends the CEO of Irish budget carrier Ryanair Holdings PLC (RYAOF), after a string of delivery delays and disputes over pricing negotiations have clouded the business relationship of the two companies.
- Ryanair CEO Michael O'Leary said that Boeing's management needs a shakeup after a number of delivery delays and stalled pricing negotiations with the company.
- Ryanair ended negotiations to purchase up to 250 MAX 10 planes in September 2021 after pricing negotiations with Boeing broke down.
- Boeing's 737 MAX 10 and 787 Dreamliner have suffered major delivery delays due to certification and manufacturing issues.
- Faster-than-expected deliveries of Boeing's MAX 10 and Dreamliner could bring on a sharp rally in the company's share price.
Ryanair Chief Executive Michael O'Leary lambasted the aerospace company's management at the airline's quarterly earnings conference call on Monday, May 16, saying that Boeing had lost its direction. "At the moment, we think Boeing management is running around like headless chickens, not able to sell aircraft, and then even the aircraft they deliver, they're not able to deliver them on time," O'Leary told analysts, according to a FactSet transcript cited by MarketWatch. "Boeing needs a management reboot, certainly on the aircraft civilian side," O'Leary added.
Pricing Negotiations Stall
Ryanair is one of Boeing's largest European customers, having purchased many of its narrow-body 737 MAX jets that it has turned to for taking market share from rivals still reeling from the pandemic. The Ireland-based low-cost carrier had also been in discussions to purchase up to 250 of Boeing's MAX 10 planes, potentially worth $33 billion, but talks collapsed last September after pricing negotiations broke down.
O'Leary said that he was willing to restart discussions with Boeing about a new MAX 10 order but had not heard anything from the company.
Delivery Woes Continue
Deliveries of the 737 MAX 10, which can carry 230 passengers, have faced lengthy delays due to more stringent certification from regulators after two fatal MAX crashes in 2018 and 2019. Meanwhile, the company's 787 Dreamliner handovers have been stalled since May 2021 after the Federal Aviation Administration (FAA) raised concerns over several manufacturing issues relating to the wide-body plane's airframe. However, several Wall Street analysts expect Boeing to resume some Dreamliner deliveries as early as this quarter.
Impact for Investors
O'Leary's criticism of Boeing's management comes at a pivotal time for the airplane maker as it attempts to bounce back from several years of decimated pandemic travel demand and ongoing delivery issues. Unflattering feedback from Boeing's larger customers has the potential to persuade other would-be plane buyers to consider the company's main rival Airbus SE (EADSY) as an alternative. Although France-based Airbus has had its own delivery issues, it has delivered 188 aircraft so far this year compared to Boeing's 135.
However, faster-than-anticipated deliveries of Boeing's MAX 10 and Dreamliner could see a sharp rally in the company's share price. Year to date (YTD), Boeing stock has tumbled 38.38%, more than twice the fall of the S&P 500 Index, which has shed 15.91% over the same period. After O'Leary's comments on May 16, Boeing's stock showed a 2.48% drop for the day to $124.05. In pre-market trading on May 17, the stock regained some of its losses to $126.87.
Disclosure: The author held no positions in the aforementioned securities at the time of publication.