Southwest sticks with Boeing fleet
Deal for 100 planes made despite earlier 737 Max grounding
DALLAS — Southwest Airlines will buy 100 new Boeing 737 Max 7 jets over the next decade, ending any speculation that the Dallasbased carrier will switch away from its all Boeing fleet.
Boeing announced the deal Monday morning. It will bring Southwest’s order of the 737 jets to more than 349 over the next decade, sealing the long partnership that was severely strained when Boeing’s flagship 737 Max line was grounded for two years.
“Today’s announcement reinforces the company’s confidence in the 737 MAX as the future of the Southwest fleet,” Southwest said in a statement.
The 737 Max 7 is the slightly smaller version of 737 Max 8, carrying 150 passengers. The Max 8, which Southwest currently flies, carries 175 passengers. The smaller jet should give the airline more options to fly to smaller destinations or more frequencies when the bigger jets aren’t required.
The deal brings Southwest aircraft spending to $5.1 billion over the next five years, all on 169 Boeing 737 Max jets.
The first 30 of those 737 Max 7 jets should be delivered in 2022, Southwest said.
“We did look at other airplanes and really the Airbus A2200 was the best competitor in the class,” said Southwest Airlines Chief Operating Officer Mike Van de Ven in an interview. “At the end of the day after we did all the modeling, did all the analytical work and went out and visited other operations, we decided that the Boeing 737 Max was the right type of fleet for us.”
Southwest had pledged to give serious consideration to a new style of jet after the 737 Max was grounded in 2019 and cost the airline billions of dollars in revenue and severely hampered growth for more than a year. Meanwhile, the airplane manufacturer and the FAA came under serious scrutiny as it was revealed that Boeing and several of its employees hid key information from federal regulators during the certification process.
Two Boeing 737 Max jets crashed in 2018 and 2019 in Indonesia and Ethiopia, killing 346 people after a faulty software program was triggered and refused to disengage, sending the plates plummeting to the ground.
But the plane was recertified in November and Southwest put it back into operation earlier this month.
Southwest is famous for its all 737 fleet, which gives it the flexibility to switch out airplanes without changing pilots or flight attendants.
“Even prior to COVID, Southwest was damaged by the Max grounding and Boeing realized that and just made it right,” said Van de Ven. “Part of that is this whole order book and just having a partnership where your manufacturer understands your business and how airplanes play a part in it.”
However, Southwest did say it would “continue to plane for multiple fleet and capacity scenarios.” That leaves open the possibility of looking into other airplanes in the future, whether that be with Airbus or other Boeing models.
The new fleet order gives Southwest nearly a decade of certainty before needing to make decisions again on restructuring its fleet, Van de Ven said.
“They just can’t quit the 737, not just yet,” said Richard Aboulafia, an aircraft analyst with the Teal Group Corp. “I’m sure that Boeing had to incentivize them just a bit to stick with it.”
Southwest did say that Boeing provided “delivery credits” to the airline due to the grounding of the carrier’s 737 fleet and after the manufacturer failed to deliver contracted airplanes in 2020.
The new 737 Max line is about 14 percent more fuel-efficient than the previous generations of 737 jets, the NG, and it’s much quieter. That fuel efficiency saves cash and gives the option to fly to destinations further away.
This particular model, the 737 Max 7, will replace Southwest’s fleet of 462 Boeing 737-700 NG planes over the next 10 to 15 years. The 737-700 NG is a smaller variant used mostly for transporting passengers from smaller suburban locations to larger airports for transfers.
With Monday’s announced deal, Southwest has orders for 200 of the 737 Max 7 jets and 180 of the larger 737 Max 8 jets. The deal also gives Southwest the option to order 270 of either model 737 Max.
The deal is a major win for Boeing, which was hampered by not only the 737 Max scandal but has also seen a major drop in orders since the COVID-19 pandemic sapped the demand out of the airline industry. Analysts are expecting it to take years for the air travel industry to return to previous levels.