Southwest Airlines adds 100 firm orders for the Boeing 737-7 MAX 7

 

Southwest Airlines announced today the completion of its previously disclosed discussions with The Boeing Company (Boeing) regarding the restructuring of its delivery schedule for MAX aircraft. The Company has completed the multi-year evaluation of the successor aircraft to its Boeing 737-700 model, with the selection of the Boeing 737 MAX 7 aircraft.

Southwest Airlines® and Boeing reached agreement on 100 firm orders for MAX 7 aircraft, with the first 30 scheduled to be delivered in 2022.

As part of the agreement, the Company also converted 70 MAX 8 firm orders to MAX 7 firm orders and added 155 MAX options for MAX 7 or MAX 8 aircraft for years 2022 through 2029.

These order book additions and revisions result in a new total of 349 MAX firm orders (200 MAX 7 and 149 MAX 8) and 270 MAX options for MAX 7 or MAX 8 aircraft for years 2021 through 2031. The Company’s previous order book consisted of 249 MAX firm orders (30 MAX 7 and 219 MAX 8) and 115 MAX options for MAX 7 or MAX 8 aircraft for years 2021 through 2026. The Company continues to expect delivery of 28 MAX 8 aircraft in total this year (19 from Boeing and 9 from third-party lessors), as well as 17 737-700 retirements, ending 2021 with 69 MAX 8 aircraft and 729 total aircraft.

Today’s announcement reinforces the Company’s confidence in the 737 MAX as the future of the Southwest fleet. This cost-effective order book with Boeing allows the Company to maintain the operational efficiencies of an all-Boeing 737 fleet to support its low-cost, point-to-point route network. The Company was the launch Customer of the MAX 8 and is scheduled to be the launch Customer of the MAX 7 after also launching prior 737 generations, including the -300, -500, and -700 series.

The Company expects more than half of the 737 MAX aircraft in its firm order book will replace a significant amount of its 462 737-700 aircraft over the next 10 to 15 years to support the modernization of its fleet, a key component of its environmental sustainability efforts. Southwest is proud of its fuel efficiency improvement of nearly 50 percent since 20002, and the billions of dollars in capital expenditures committed to the 737 MAX order book reinforces the airline’s commitment to further improve fuel efficiency and reduce carbon emissions.

“We remain diligent in managing costs and capital spending, in particular in this environment. Our refreshed order book with Boeing allows Southwest to preserve the low-cost advantages of a single fleet type, and the balance of firm orders and options—along with flexibility with 737-700 retirement plans—allows the opportunity to manage our fleet needs over the next decade,” said Tammy Romo, Executive Vice President and Chief Financial Officer. “We now estimate contractual aircraft capital spending for all years 2021 through 2026, which consists of 169 MAX firm orders with Boeing (135 MAX 7 and 34 MAX 8 aircraft), to be approximately $5.1 billion. Our estimated contractual aircraft capital spending remains immaterial in 2021, and is expected to be approximately $700 million in 20223. We continue to estimate 2021 capital expenditures to be no more than $500 million, driven primarily by technology, facilities, and operational investments.”

The Company’s flight schedules are currently published and available for sale through August 16, 2021. The Company remains cautious in this uncertain environment where travel demand remains depressed due to the negative financial effects of the COVID-19 pandemic; as such, available seat mile (ASMs, or capacity) plans have not been refined beyond May 2021. The Company will continue to plan for multiple fleet and capacity scenarios; however, the refreshed 737 MAX order book and predominantly owned 737-700 fleet is intended to provide a high degree of flexibility for the Company to manage fleet retirements, growth opportunities, and capital spending in a variety of economic environments. Additional information regarding the Company’s delivery schedule is included in the accompanying table.

1. 737 MAX 8 compared with the 737-800. MAX 7 is expected to produce comparable fuel efficiency improvement compared with the 737-700.
2. Measured as revenue ton miles per gallon from 2000 through 2019. A revenue ton mile is one ton of revenue traffic (passenger and cargo) transported one mile. See 2019 Southwest Airlines One Report for more information.
3. Net of progress payments made on undelivered MAX aircraft and previously agreed upon delivery credits provided by Boeing to the Company due to the settlement of 2020 estimated damages relating to the Federal Aviation Administration ( FAA) grounding of the 737 MAX aircraft.

NEW 737 DELIVERY SCHEDULE

The Boeing Company

MAX 7

MAX 8

MAX 7 or 8

Additional

Firm Orders

Firm Orders

Options

MAX 8s

Total

2021

19

9

28

2022

30

42

72

2023

30

38

68

2024

30

40

70

2025

30

40

70

2026

15

15

40

70

2027

15

15

30

60

2028

15

15

30

60

2029

20

30

10

60

2030

15

45

60

2031

10

10

200

149

270

9

628

New 737 Delivery Schedule footnotes:

  1. The Company has flexibility to designate firm orders or options as MAX 7 or MAX 8, upon written advance notification as stated in the contract.
  2. The 9 additional MAX 8 aircraft shown above are leases to be acquired from various third parties. The Company also received 7 leased MAX 8 aircraft in fourth quarter 2020, for a total of 16 MAX 8 operating leased aircraft from third parties in 2020 and 2021, combined.

PREVIOUS 737 DELIVERY SCHEDULE

The Boeing Company

MAX 7

MAX 8

MAX 8

Additional

Firm Orders

Firm Orders

Options

MAX 8s

Total

2021

7

100

9

116

2022

27

14

41

2023

12

22

23

57

2024

11

30

23

64

2025

40

36

76

2026

19

19

30

219

115

9

373

Previous 737 Delivery Schedule footnote:

  1. The ‘Previous 737 Delivery Schedule’ shown above is for reference and comparative purposes only. It should no longer be relied upon. See ‘New 737 Delivery Schedule’ for the Company’s current aircraft order book.

In other news, Southwest will add new service at Myrtle Beach International Airport (MYR) beginning May 23, 2021.

Within the first week of service: Baltimore/Washington (BWI)Chicago (Midway), and Nashville; and additional nonstop service from Dallas (Love Field) and Pittsburgh will operate on Saturdays beginning May 29. A third wave of service to this stretch of the South Carolina coast will bring options to fly with Southwest nonstop from AtlantaColumbus, and Indianapolis beginning June 6, 2021.