UPDATE 2-Ryanair says likely to shelve 200-plane Boeing deal

Tue Dec 8, 2009 9:34am EST

* Ryanair deal with Boeing threatened by new delivery terms

* Dispute over pricing of 200 planes was almost resolved

* Ryanair says does not intend new bid for Aer Lingus

* O'Leary sees slow recovery in aviation business (Adds detail, background)

By Pete Harrison

BRUSSELS, Dec 8 (Reuters) - Ireland's Ryanair (RYA.I) is likely to shelve plans to buy 200 Boeing (BA.N) aircraft because the U.S. plane maker wants to change the delivery conditions, Ryanair Chief Executive Michael O'Leary said on Tuesday.

"We have effectively almost reached agreement on price for a 200-aircraft order ... but the deal is unlikely to take place because now they want to go back and change delivery conditions," O'Leary told Reuters in an interview.

O'Leary, renowned in the industry for driving hard bargains, had already warned last month that talks on ordering 200 aircraft for 2013-16 delivery had progressed little and that he might slow down Ryanair's rapid growth from 2013.

"Last week we had pretty much reached agreement with them on price, then over the weekend they wanted to change delivery conditions," he said.

"We're going to make a final decision at the board meeting next Thursday. Unless there's some change in their position over the next week, it's off."

O'Leary said he had no alternative plan to buy aircraft from Boeing's European rival, Airbus EAD.PA. But the European firm said it was not interested in a bidding war over Ryanair.

"With what I know of the pricing levels they have in mind, I think I can say this is one order that Boeing should win," Airbus sales chief John Leahy told Reuters in an interview.

SLOW RECOVERY

The Boeing 737-800 aircraft used by Ryanair are worth $77 million at list prices, but planes are often sold at discounts.

Ryanair still has 102 planes due to arrive from a previous order that have yet to be delivered, according to Boeing data.

Buying aircraft cheaply during industry downturns has allowed Ryanair to pare costs to a minimum and take market share from rivals unable to match its cut-price fares.

O'Leary famously placed an order for 100 new Boeing aircraft and options on 50 more at rock-bottom prices in the wake of the Sept. 11, 2001 attacks on the United States.

"I think you'll see a long, slow recovery here, not some short, sharp rebound," he said of the economic crisis and its effects on the airline industry.

"Clearly, I think, we've hit the bottom."

That industry slowdown has hit higher-cost airlines hard, including Ireland's Aer Lingus (AERL.I), which now plans to shed almost a fifth of its staff as part of a plan to cut operating costs by 97 million euros ($144 million).

But O'Leary, who has previously launched two unsuccessful hostile bids for Aer Lingus, said he would probably not make another offer for the carrier.

"I think we're highly unlikely to make a third bid for Aer Lingus," he said. ($1=.6752 euro) (Additional reporting by Tim Hepher, Editing by Dale Hudson and Rupert Winchester)

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