UPDATE 5-Ryanair buys Boeing jets worth $4 bln, eyes growth Thu Feb 24, 2005 03:43 PM ET (Updates share price, adds comment from Boeing CEO) By Michael Smith LONDON, Feb 24 (Reuters) - Top European discount airline Ryanair (RYA.I: Quote, Profile, Research) ordered new planes worth more than $4 billion from Boeing Co. (BA.N: Quote, Profile, Research) on Thursday as part of an ambitious plan to double its passenger numbers by 2012. Dublin-based Ryanair, which aims to become Europe's largest airline in seven years, said it had ordered 70 Boeing 737-800 aircraft and had taken options to buy 70 more. The no-frills airline plans to expand aggressively in Europe, particularly in Spain and Italy, with its strategy of introducing low fares after reaching near saturation in its core markets in Britain and Ireland. The order took the market by surprise. Ryanair shares were up 3.1 percent to 6.33 euros by 1450 GMT in Dublin after earlier rising as high as 6.42 euros. Boeing shares were up 1.9 percent at $53.75 on the Big Board in New York. "With this new aircraft order, it confirms they are going to continue growing at double-digit rates until 2012 at least. It is achievable. You will see most of the growth from European bases," BNP Paribas analyst Geoff Van Klaveren said. Boeing's list price for the plane is $65 million, putting the deal's value at up to $9.1 billion if all options are converted to firm orders. Ryanair said it had received a steep discount and the firm orders were worth more than $4 billion. "Boeing had their order book a little bit empty out in 2008-2011, and we thought it was time to extend our horizons a bit...we see it a bit like a free seat," Ryanair Finance Director Howard Millar told Reuters. The deal is a boost for Boeing in its efforts to recover the market lead for aircraft sales from rival Airbus (EAD.PA: Quote, Profile, Research) , which has topped it in deliveries for the last two years. "I think we have our sales force reenergized and a bit more involved than they have been in the past, so we're enjoying some more success," said Boeing chief executive Harry Stonecipher in a conference call. Analysts agreed Boeing's marketing had improved. "Boeing might be gaining some market share back against Airbus, though it's hard to put numbers on it," said Cai Von Rumohr, an analyst at SG Cowen. "Part of it's being more aggressive and going out and talking to their customers." EXPANSION PLAN The 737 is powered by CFM56 engines from CFM, a Franco-U.S. joint venture between GE (GE.N: Quote, Profile, Research) and Snecma (SNEC.PA: Quote, Profile, Research) . Millar said 80 percent of the new aircraft would be funded by U.S. government-backed debt financing. Ryanair said the deal would help it increase passenger numbers at double-digit levels for at least seven years, open 10 new bases and create 2,500 jobs, including pilots, cabin crew and engineers. The airline wants to double passenger traffic from 34 million a year in 2005/06 to over 70 million by 2012. It plans to take on European domestic markets, carrying passengers on journeys that take too long by rail. Analysts had previously expected its passenger growth to slow after 2009. Ryanair had warned of a blood bath for European airlines this winter as stiff competition drives out rivals, high fuel costs bite and ticket prices fall. However, it raised forecasts last month after a stronger-than-expected fiscal third quarter to end-December and has continued to expand despite falling yields -- or average revenue per passenger. Ryanair executives told analysts on Thursday they still expected yields to rise by up to 5 percent in the fourth quarter, before more declines next year. The carrier also announced plans to install winglets across its entire fleet of 737s, worth about $11 million, which it said would lower its fuel consumption by 2 percent. Fuel makes up more than a quarter of the carrier's costs. Ryanair is already scheduled for delivery of about 100 new Boeing aircraft by the end of this year from a previous firm order of 155, giving it the world's second biggest all-737 fleet behind U.S. role model, Southwest Airlines Inc. (LUV.N: Quote, Profile, Research) . (Additional reporting by Jason Neely, Andrea Shalal-esa and Christian Plumb) Roger EWROPS