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Ryanair has outlined the huge savings and competitive advantage it expects to gain from bringing engine maintenance in-house.
Reviewing the LCC group’s current engine support framework, CFO Neil Sorahan praised the “outstanding power-by-the-hour (PBH) deal” it has had with CFM for the last 25 years.
However, factors such as the lower time on wing of Ryanair’s new-generation CFM Leap-1B engines mean that “if we were to try and renegotiate that deal as is today, you’d be locking in four to five times the rate that we’ve been paying,” he said on an earnings call in mid-May.
Instead, launching its own engine facility will mean it pays only roughly double what it did before.
Another key benefit, Sorahan noted, will be Ryanair’s ability to put engines through shops faster than its competitors, giving it more available capacity. “I think that will massively increase the gap between ourselves and our competitors over the next number of years,” he said.
Furthermore, less time in the shop means less need for spare engines, reducing costs in that area, too.
In April, Aviation Week reported that Ryanair was considering six locations—the Baltic states, Italy, Morocco, Northern Ireland, Poland, and Spain—for its two planned engine maintenance facilities.
Group CEO Michael O’Leary told Aviation Week that a final decision would occur by early summer and that Ryanair would invest $800 million across both sites.
During the recent earnings call, he pointed out that mounting cost pressures on airlines could open distressed buying opportunities for Leap engines and parts, leading to more savings for Ryanair. “About 85% of the cost of engine maintenance is the spare parts, it’s not labor,” he said.
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