WestJet has signed a letter of intent to purchase 65 Boeing 737 MAX aircraft, including 40 737 MAX 8s and 25 737 MAX 7s.
The Canadian airline will substitute existing orders for 15 Boeing 737NG jets, which are currently scheduled to deliver between December 2014 and 2018, with Boeing 737 MAX aircraft, for a net increase of 50 committed deliveries to its fleet plan.
Deliveries of the Boeing 737 MAX jets to WestJet are scheduled to begin in September 2017.
“We are proud to continue our long-standing relationship with Boeing and are thrilled that we will be among the first North American airlines to fly the new 737 MAX in its first year of commercial operation,” says Gregg Saretsky, WestJet’s president and CEO. “This pending order reinforces our strategy of maintaining the flexibility in our fleet plan while enabling us to introduce new fuel-efficient technology and enhance our inflight guest experience.”
Saretsky adds: “Our strong balance sheet allows us the opportunity to support our low-cost business model and contribute to our profitable growth through the renewal of our fleet with a lower operating-cost aircraft.”
Boeing currently has firm orders from five other airlines in North America for its 737 MAX family.
Including the new pending order for 50 aircraft, WestJet’s future Boeing 737 aircraft deliveries total 92. These include its commitments for the proposed Boeing 737 MAX 7 and MAX 8 aircraft. The commitments feature substitution rights to the 737 MAX 9, scheduled for delivery from 2017 through 2027.
WestJet notes that as a result of the flexibility built into its fleet plan, which includes its lease-renewal options but excludes any potential sales other than the previously announced sale of 10 737 Boeing 737NGs aircraft in 2014 and 2015, its fleet could be as large as 162 Boeing 737 aircraft or as few as 120 737s a decade from now.
As a result of its pending order, WestJet now anticipates its capital expenditures to range between C$210 million and C$220 million for the third quarter of 2013, and between C$690 million and C$710 million for the full-year 2013.
Previously, WestJet’s guidance was between C$100 million and C$110 million for the third quarter of 2013, and between C$610 million and C$630 million for the full year of 2013. The increase in full-year 2013 capital expenditure incorporates reduced deposits forecasted in the fourth quarter of 2013 as a result of the Boeing 737NG substitutions.
Including its new 737 MAX pending order, WestJet’s cumulative aircraft capital expenditures from 2014 to 2017 will be lower than previously expected due to the substitution of 15 existing Boeing 737NG aircraft orders which were scheduled to be delivered between December 2014 and 2018 to Boeing 737 MAX aircraft delivering in 2017 and beyond.
WestJet expects to enter into a definitive purchase agreement for the 65 aircraft before September 30.
WestJet’s current fleet consists of 103 Boeing 737NGs (737-600s, 737-700s and 737-800s), and four Bombardier Q400 NextGen aircraft. (The Canadian carrier has ordered and optioned a total of 45 of the Bombardier turboprop regional airliners to date for its new sister regional carrier, WestJet Encore.)
Boeing says it looks forward to working with WestJet to finalize the 737 MAX order, which the manufacturer values at US$6.3 billion at current list prices.
When WestJet finalizes the order, Boeing will post it to its Boeing Orders & Deliveries website as a firm order.
Engine joint venture CFM International, which is manufacturing the CFM LEAP-1B turbofan engines which will power all Boeing 737 MAX aircraft, values WestJet’s pending LEAP-1B engine order for the 40 737 MAX 8s and 25 737 MAX 7s at US$1.7 billion at list price.