Southwest Airlines orders 100 Boeing 737 Max planes
Southwest Airlines Boeing 737 passenger jet taxis at Denver International Airport in Denver, Colorado
DALLAS - Southwest Airlines said Monday it is expanding its all-Boeing fleet with an order for 100 Max jets instead of buying planes from Europe's Airbus.
Southwest ordered the 150-seat 737 Max 7 and expects the first 30 to show up next year. It is also converting orders for 70 Max 8s to the smaller model.
The Dallas-based airline publicly mused about buying the Airbus A220 instead, sending executives on a scouting trip to Europe. It would have been a huge blow to Boeing — in money and pride — if Southwest, its biggest customer, had gone with Airbus. However, CEO Gary Kelly said sticking with Boeing "was our preference all along."
"This to me says that they expect air travel to come back, and they expect these aircraft to be an important part of their fleet," said SMU economist Mike Davis.
Financial terms of the deal were not announced. The Max 7 lists for $99.7 million, although airlines routinely receive huge discounts.
The new Max 7s eventually will replace Southwest's aging fleet of 143-seat Boeing 737-700s while providing better fuel mileage.
Combined with past orders, Chicago-based Boeing is in line to build more than 600 Max 7 and Max 8 jets for Southwest through 2031. Southwest expects to spend about $5.1 billion on aircraft through 2026.
"I really think this means that Boeing believes there’s not going to be any long-lasting reputational damage to the 737 Max," Davis said.
Southwest is also taking options for 155 more jets, both Max 7s and 8s.
Kelly said Monday’s announcement came on the 50th anniversary of the airline’s agreement with Boeing for its first three planes. Most big airlines operate several plane models from more than one manufacturer, but Southwest has turned its reliance on the 737 into an advantage, simplifying maintenance and pilot training and scheduling.
Kelly said of the new deal in a statement: "We are proud to continue our tradition of being the world's largest operator of an all-Boeing fleet."
That loyalty was put to the test, however, when the Max was grounded worldwide in March 2019 after two crashes that killed 346 people. The grounding forced Southwest and other airlines to cancel thousands of flights in all. Last year, Southwest disclosed that it received $428 million in initial compensation from Boeing.
Regulators in the U.S., Europe, Canada, Brazil and other countries cleared the plane to resume flying after Boeing changed an automated flight-control system that played a role in the crashes. Southwest resumed passenger flights with its Max 8 jets on March 11. American and United had already resumed Max flights, and Alaska Airlines began using the plane too.
Despite the pandemic uncertainty moving forward, other airlines like Fort Worth-based American have also been snapping up new aircraft.
But Davis says he still sees some potential unknowns.
"I’ve always believed leisure travel will come back, and people are going to do it again as soon as they can," he said. "I’m wondering about the business travel because we have learned to use all these new technologies."
Earlier this month, Boeing Co. reported its first positive net orders for commercial airplanes in 15 months. The orders could indicate that airlines are starting to feel more optimistic about a rebound in travel, which has been devastated by the coronavirus pandemic.
Boeing shares gained about 2% in late-morning trading.