Citigroup has kept its 'neutral' rating for Irish budget airline Ryanair but said that its recent aircraft order from US manufacturer Boeing ends years of uncertainty over the company's growth plans.

Ryanair said on Tuesday that it had signed an agreement with Boeing to purchase 175 new Next Generation 737-800 airplanes. When finalised, the deal will allow Ryanair to grow traffic to more than 100m passengers per annum and create more than 3,000 new jobs across the airline, it said.

Analysts at Citi said that the deal was largely expected after Ryanair announced its 10-year growth plans in November.

They said: "With this order, Ryanair has the flexibility to grow passenger volume at between 3-8% compound annual growth rate by FY19, driven by the rate at which it disposes aircraft, extends operating leases and grounds aircraft in the winter. Ryanair expects its market share to rise from 15% to 20% by FY19, as other airlines restructure/downsize."

Citi also said that the deal was likely made at a substantial discount and on favourable terms, though this was not made public.

"Size of the order is US$15.6bn at current list prices but, in reality, we would expect capex to be at least 50% less than this based on current market values for new B737-800s, the 'insurance' that this order provides to Boeing's end-of-line production on the current type, the size of the order and Ryanair's own purchasing power and negotiation skills. Unit operating cost could improve slightly as a result of this order due to younger age."

Shares were up 3.88% at €6.31 in morning trade on Wednesday.

BC

Related share prices
Ryanair Holdings (RYA) share price