Southwest’s pilots could foil the on-time arrival plans of Boeing’s latest jet

The carrier may fly the 737 Max early—if its pilots don’t ground it Charges of “a high-stakes and illegal game of chicken”

Boeing says it plans to break with the industry’s tradition of late deliveries of new planes by having its latest jet, the 737 Max, ready to fly in the first half of 2017, several months before its planned target. Yet the airplane’s first customer, Southwest Airlines, may not benefit from the Max’s early arrival: Its pilots’ union sued in federal court on May 16 to keep the carrier from flying the plane until the 8,300 members of the Southwest Airlines Pilots’ Association (Swapa) get a new labor contract.

As the airline sees it, the plane is covered under an existing agreement. Other than having more fuel-efficient engines, Southwest contends, the Max is basically the same aircraft type as the 737-800, which it already flies under a 2010 side deal to the pilots’ contract. The union rejects that position. “There will be absolutely no side letters to cover the Max,” says Swapa President Jon Weaks. “The Max will have to be part of the new contract—period.”

The carrier and the pilots have been negotiating a labor pact for more than four years. Last November, rank-andfile Southwest pilots rejected a tentative deal that would have given them raises of about 18 percent. A new union

team restarted negotiations in March.

The talks have turned increasingly fractious since the pilots’ contract became amendable in 2012 (under federal rules, airline contracts don’t expire) and Southwest began piling up record profits, including $2.2 billion in 2015—double the prior year’s. Southwest says it must keep expenses down to preserve its low-cost advantage over larger rivals. The pilots argue that their contract must recognize the industry’s restructuring and its return to strong profitability.

In a statement, Southwest Chief Executive Officer Gary Kelly called the pilots’ Max suit “unnecessary and premature” and said a contract deal can be reached before the Max is ready. If a contract isn’t reached, the union must use arbitration instead of a lawsuit under its current accord, he said.

In its court filing, the union said that the airline is trying to force pilots “to negotiate the Max dispute with an illegal gun to the head of Swapa. … Southwest Airlines, in short, is presently engaging in a high-stakes and illegal game of chicken.”

If the dispute drags on, the arrival of the first Max—as early as March 2017—could give the pilots leverage in their bid for higher pay for pilots of the new aircraft. Southwest ordered 200 of them in 2011. But if the airline doesn’t come to terms, it will face the prospect that brand-new, fuel-efficient planes that it needs could sit idle.

Whoever comes out on top in this battle, the real winner will be Boeing, which derives the bulk of its profits from the 737, its best-selling aircraft. It has 3,090 orders for the Max, and it’s working to increase overall 737 production from 42 per month to 47 next year and ultimately to 57 in 2019. If Southwest isn’t ready to take delivery of its planes as scheduled, Boeing already has other equipment-hungry carriers eager to take the jets—ahead of schedule.

The bottom line The early arrival of Southwest’s 737 Max jets could give pilots leverage in their bid for higher pay.