European Airlines: Ryanair Rising, Part V. Deep dives on unit cost, locked down for years to come

Research evidence excerpt

European Airlines: Ryanair Rising, Part V. Deep dives on unit cost, locked down for years to come

seating

capacity and next-generation technology, reinforcing Ryanair’s cost leadership position.

Deep dive on unit cost: the CFM deal. I: The deal. Maintenance costs are currently elevated across the airline industry,

reflecting tight maintenance capacity, inflation in the cost of parts and labor, and greater maintenance requirements for next-

generation aircraft. To mitigate further cost increases, Ryanair has signed a long-term agreement with CFM that combines

fleet support with the progressive insourcing of engine maintenance. Under the deal, CFM will remain Ryanair’s exclusive

supplier of engine parts for its growing fleet of LEAP-1B engines, with annual parts purchases expected to exceed

$1bn once the airline reaches around 800 aircraft and approaches 2,000 engines. At the same time, CFM will support the

development of two new Ryanair engine facilities in Europe (one scheduled for end-2028 and the other during 2029),

enabling maintenance activities to gradually transition from third-party facilities to Ryanair’s own shops.

Deep dive on unit cost: the CFM deal. II: economics. We estimate the benefit of Ryanair’s CFM agreement by modeling

future LEAP shop visits based on fleet growth, aircraft utilization and engine maintenance cycles. We then compare an

insourced model, which requires around €1.5bn of shop investment but benefits from higher productivity, lower spare-

engine needs and better cost control, with an outsourced PBH model, where maintenance inflation remains higher, cost

control is lower, and there must be a consideration for the profit margin of the third party MRO. While both scenarios generate