Buoyed by a record-setting order from , says it now has 13 customers for its 737 MAX and believes it could have 1,400 to 1,500 firm commitments for the aircraft by the end of 2012.
Jim Albaugh, president and CEO of, made the prediction during a press briefing today about Southwest’s firm order for 150 737 MAX narrowbodies and 58 additional aircraft. Southwest will be the launch customer for the MAX, with the first four deliveries scheduled for 2017.
The order for 208 aircraft is the largest in Boeing’s history in terms of number of airplanes and dollar value, Albaugh says. adding that it even tops the recentorder for 200 .
The Southwest deal is the first firm agreement for the MAX, and also includes options for another 150 of the aircraft. Albaugh says the Southwest deal brings the total number of commitments for the MAX to 948, although most are not yet firm orders.
Neither Boeing nor Southwest will disclose how much the airline is paying for the 208 aircraft it just ordered. They have a list value of $19 billion, but both Boeing and Southwest acknowledge the carrier negotiated a deep discount.
The only pricing hint came from Southwest. Chief Operating Officer Mike Van de Ven says that for the 350 total airplanes Southwest now has on order, the carrier’s average annual capital expenditure commitment from 2012 through 2022 will be $1.2 billion—or $12 billion through the period.
Van de Ven says Southwest took a close look at the NEO, although the carrier has been an all-Boeing customer for its entire existence. He says both the NEO and the MAX “deliver substantial improvements on existing aircraft,” but the airline concluded the MAX was the best choice for Southwest with its combination of improved economics, fleet commonality and “network fit.” Southwest officials also cited its weight, which they said would be somewhat lighter, and the ability to opt for a bigger aircraft with the 737 MAX 8.
“It really comes down to what works best for our mission,” says Brian Hirshman, senior VP-technical operations. For example, the MAX works better with the shorter field at Chicago Midway International Airport. Van de Ven says the MAX gives Southwest “a little more mission flexibility at some of the airports we serve” than the NEO would have.
Hirshman adds that one of Southwest’s requirements for the MAX is that it be capable of at least the same range as the 737NG with the same or better payload. Southwest is satisfied the MAX will do that, he says. John Hamilton, chief project engineer for the Boeing Commercial Airplanes 737 program, says Boeing is still working with Southwest and other customers to determine what the markets want in terms of payload and range.
Regarding the engine selection—LEAP-1B—Van de Ven says Southwest does like Pratt & Whitney’s geared turbofan technology. But as a package with the MAX, the LEAP seems to maximize the fuel efficiency and already has proven itself.
“We know that they are going to work,” he says, and CFM has been very good at delivering products on time and meeting performance guarantees.
The MAX order has been a long time coming for Southwest, which has been pressing Boeing for a more efficient 737. The carrier says most of the 350 new aircraft now on order for delivery by 2022 will be used for fleet replacement and will accelerate the retirement of its 737 Classics. Southwest says if it decides to grow, it will slow down retirements or exercise some of its options. It has 191 737 Classics in service and two stored, according to data from the Aviation Week Intelligence Network database.
Southwest says the new order will not affect its short-term plans, which include keeping capacity essentially flat in 2012. It is taking delivery of 28 737-800s this year in addition to five on lease.
Southwest says the MAX will be 16-18% more fuel-efficient than some of the Classics it will replace, and 10-11% more efficient than the 737-800NG. The -700NG, which Southwest is scheduled to start receiving in 2014, will be 6-7% more efficient than the Classics, it adds.
One fleet question that remains unanswered for Southwest is what it is going to do with the Boeing 717 aircraft it inherited with its acquisition of AirTran Airways. Those aircraft are on leases that expire between 2017 and 2024.
Van de Ven says Southwest has talked to Boeing about the airline’s desire to get rid of them earlier, but nothing has been worked out yet. Southwest is working hard to determine what the alternatives are, he says, but he adds that the carrier “will operate those airplanes through the lease term if we have to.”