Southwest exercises 34 options for the new Boeing 737-7 MAX 7s

Southwest Airlines has announced it will exercise 34 options into firm orders for the Boeing 737-7 MAX 7. This brings the firm total to 234 aircraft.

In addition, Southwest also has 149 Boeing 737-8 MAX 8 on order through 2031.

The company will use the new aircraft to retire older 737s.

The airline filed this update:

Based on improving revenue trends and ongoing fleet modernization plans, the Company recently entered into a Supplemental Agreement with The Boeing Company (Boeing) to increase its 2022 firm orders by 34 Boeing 737 MAX 7 (MAX 7) aircraft (consisting of two 2022 options exercised and 32 options accelerated and exercised from later years), resulting in 234 firm orders for MAX 7 aircraft.
Additionally, the Company accelerated 32 options into 2023, 16 options into 2024, 16 options into 2025, and added 32 new options into 2026 through 2027, bringing the total firm and option order book to 660 aircraft.
The Company continues to estimate its 2021 total capital expenditures to be approximately $500 million, with minimal aircraft capital spending, and now expects its contractual aircraft capital spending to be approximately $1.5 billion in 20225, compared with its previous guidance of approximately $700 million.
Fleet and capacity plans will continue to evolve as the Company manages through this recovery period, and it will continue to evaluate its remaining 40 MAX options in 2022.
The Company continues to plan to retire 30 to 35 of its Boeing 737-700 aircraft annually, on average, over the next 10 to 15 years; however, with its cost-effective order book, the Company retains significant flexibility to manage its fleet size, including opportunities to accelerate fleet modernization efforts if growth opportunities do not materialize.
Additional information regarding the Company’s delivery schedule is included in the following table.

 

New 737 Delivery Schedule:

The Boeing Company
MAX 7
Firm Orders
MAX 8
Firm Orders
MAX 7 or 8 Options Additional MAX 8s Total
2021 19 9 28 (a)
2022 64 40 104
2023 30 70 100
2024 30 56 86
2025 30 56 86
2026 15 15 40 70
2027 15 15 6 36
2028 15 15 30
2029 20 30 50
2030 15 45 60
2031 10 10
234 149 (b) 268 9 (c) 660
(a) Includes 20 737 MAX 8s delivered as of March 31, 2021, consisting of 12 owned and 8 leased aircraft.
(b) 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.
(c) These 9 additional MAX 8 aircraft are leases from various third parties, including 8 leased MAX 8 aircraft delivered in first quarter 2021. 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.

Previously on March 29, 2021 the company issued this statement:

Southwest Airlines has announced 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. This agreement underscores Southwest’s commitment to continued modernization of its fleet with more fuel-efficient and climate-friendly aircraft. It also positions Southwest to capitalize on growth opportunities, when they arise.

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.

This 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.

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.