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December 19, 2009

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Ryanair halts 200-planes deal

IRISH airline Ryanair has pulled out of talks to buy 200 aircraft from Boeing and is to trim investment from 2011 to cut costs and free up cash to pay investors, it said yesterday.

The low-cost carrier, close to being Europe's biggest airline, said it aimed to reduce capacity growth from 2011 and return surplus cash to shareholders from 2012 to 2015.

"It is appropriate to return these surplus funds to shareholders if we cannot use them to purchase aircraft on terms which enable us to meet our demanding return on capital targets," Chief Executive Michael O'Leary said.

Analysts said Ryanair would not be able to meet its long-term earnings target if growth slowed or ended after 2012, forcing it to eventually increase average fares. "Given the already low cost base, further significant unit cost savings will be difficult to deliver," Arbuthnot said in a note.

The company had previously said a deal for 200 Boeing 737-800 aircraft for 2013-16 delivery was unlikely because the United States plane maker wanted to change conditions.

Ryanair, which has thrived on consumers trading down in the recession, said its plan to receive 112 Boeing aircraft from 2010-12 was unaffected, and it would continue to work with Boeing on the 48 deliveries scheduled for 2010.

O'Leary said he had no plans to reopen talks with Boeing or any other aircraft manufacturer and would focus on maintaining Ryanair's strong traffic and new route growth into 2010.


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