Southwest Airlines has placed a firm order for 150 Boeing 737 MAX aircraft and 58 Next-Generation 737s and has taken options on 150 additional 737 MAX jets, becoming the first customer to finalize an order for the 737 MAX and the launch customer for the new-engine variant.
Boeing says the 208-aircraft firm order is the largest in its history both in dollar value, nearly $19 billion at list prices, and in the number of aircraft. The announcement represents the third time in a month that Boeing has announced a new order which it has called the largest in its history by dollar value.
The manufacturer previously cited recent orders for 50 Boeing 777-300ERs from Emirates, and then for 29 37-900ERs for Indonesia’s Lion Air, along with a commitment for 201 Boeing 737 MAX aircraft, as its largest deals by dollar value. The Lion Air deal was also the largest in terms of aircraft numbers: at 230 aircraft, it was bigger even than Southwest Airlines’ order, though Lion Air has not yet finalized its 737 MAX order. Like Southwest, Lion Air also optioned 150 additional 737s.
Engine manufacturer CFM International values Southwest’s orders for LEAP-1B and CFM56-7B engines, which respectively will power the 737 MAX and 737NG aircraft in Southwest’s new order, at about $4.7 billion.
The December 13 orders by Southwest support the Dallas-based carrier’s initiative to modernize its all-Boeing fleet, the world’s largest fleet of 737s at more than 700 aircraft (according to CFM International, whose engines power all of them).
As the 737 MAX launch customer, Southwest Airlines will take delivery of the first 737 MAX when it enters service in 2017.
“Southwest is a special Boeing customer and has been a true partner in the evolution of the 737,” said Jim Albaugh, Boeing Commercial Airplanes’ president and CEO. “Throughout our 40-year relationship, our two companies have collaborated to launch the 737-300, 737-500 and the Next-Generation 737-700 – affirming the 737 as the world’s preferred single-aisle airplane. As launch customer for the 737 MAX, Southwest, Boeing and the 737 continue that legacy.”
The new Southwest orders join the airline’s existing firm orderbook of 142 aircraft, bringing Southwest’s total firm orders with The Boeing Company to 350 aircraft for delivery from 2012 through 2022, which are intended predominantly to serve as replacement aircraft as the airline continues the modernization of its fleet.
Dallas-based Southwest Airlines also now holds options on 92 Boeing 737NG-family jets and 150 737 MAX-family aircraft.
Boeing says the 737 MAX, which is powered by CFM International LEAP-1B engines, will reduce fuel burn and CO2 emissions by an additional 10 to 12 per cent over today’s 737NG family. Boeing claims the 737 MAX will have the lowest operating costs in the single-aisle segment with a 7 per cent advantage over the Airbus A320neo family, though Airbus strongly disputes Boeing’s claims, claiming in turn that the A320neo will have the lower fuel burn and operating costs.
Bombardier, meanwhile, claims its CSeries family – aimed at the 110-to-149-seat market segment – will have much lower operating costs than either of the A320neo or 737 MAX families, since its aircraft will be of all-new design and not just re-engined versions of existing jets, which the new Boeing and Airbus models will be.
“Today’s environment demands that we become more fuel efficient and environmentally friendly, and as the launch customer of the Boeing 737 MAX, we have accomplished both,” said Gary Kelly, Southwest Airlines’ chairman, president, and CEO. “We are teaming up with our friends from Boeing to lead the industry in a way that makes both our shareholders and our customers proud to associate with Southwest Airlines. Today’s announcement will allow us to maintain our position as a low-cost provider in the years ahead.”
“We are enthusiastic about our fleet modernization plans, and especially about becoming the launch customer for the Boeing 737 MAX,” said Mike Van de Ven, Southwest Airlines’ executive vice president and chief operating officer. “The much improved fuel efficiency of the 737 MAX will enable us to improve our fuel costs, as well as our environmental performance, with great comfort and reliability to offer to our customers.”
Van de Ven continued, “Overall, we expect the superior economics of our fleet modernization plan to meet our 15 per cent pretax return requirement and provide substantial flexibility to manage our growth in a variety of economic conditions over the next decade. Additionally, these new aircraft will enhance the customer service offering with the new Sky Interior.”
With the Southwest order, the Boeing 737 MAX family has orders and commitments for more than 900 aircraft from 13 customers, while he Next-Generation 737 family has won orders for more than 6,600 aircraft and Boeing has delivered more than 3,800.
Southwest Airlines’ new firm orders for 58 Boeing 737NGs include the exercise of 25 previously existing options. The carrier will take Boeing 737-800s instead of 737-700s for all Boeing 737NG deliveries scheduled for 2012 and 2013, in addition to a portion of its 2014 deliveries.
For the 737 MAX order, Southwest has flexibility to accept MAX 7 or MAX 8 deliveries (the equivalent versions to the 737-700 and 737-800 respectively). The revised order book also includes options for 78 Boeing 737NGs and 150 737 MAX options, bringing total option positions from 2014 through 2027 to 242 aircraft.
Southwest’s Boeing 737 delivery schedule now calls for it to take 28 737-800s in 2012, 41 in 2013 and four in 2014, along with 35 737-700s. However, Southwest now has the flexibility to specify 737-800s instead of any 737-700s in future years if it wishes. Southwest also holds options on 15 737NGs for 2014 delivery.
In 2015 Southwest is scheduled to take delivery of 36 Boeing 737NGs and it has options on 12 more. For 2016, the Dallas-based airline is due to take 31 737NGs and Southwest holds options on a further 12.
Then, in 2017, Southwest expects to take delivery of 15 737NGs (with options on 25 more) and its first four Boeing 737 MAX-family jets. In 2018, Southwest is due to receive 10 new 737NGs (the airline holding options on 28 more) and 15 737 MAX aircraft.
After 2018 all new 737s delivered to Southwest will be 737 MAX-family aircraft. Southwhest is scheduled to receive 33 in 2019 (as yet Southwest holds no options for that year); 34 in 2020 (all on firm order); 34 in 2021, with 18 additional aircraft optioned; and 30 in 2022, with 19 additional aircraft on option.
Southwest Airlines also holds options for 23 737 MAX jets in 2023 and 23 in 2024, and options on 67 more for delivery from 2025 through 2027.