Southwest, airtran and the 737-800

Addison Schonland from airinsight has this interesting piece about Southwest and airtran and what an order for the 737-800 could mean. He is absolutely right I think: to understand the rationality behind it you have to take a deeper look into the economics of the 737-800 and it’s competitor, the A320.
Say (just for simpliciy), the operating costs of the 737-800 and the A320 are equal (inreality it depends from airline to airline, route to route etc., see also Fuel burn and operating costs) . Then, because the 737-800 is a little bit larger than the A320 (a fair comparison has 162 seats for the 737 and 150 for the A320), the operating costs per seat are lower for the 737-800 by 8%.
The reengining of the A320 will drive costs down by roughly 15% (per the better SFC, the skarklets, the lower maintenance costs of the engine and whatever Airbus might do besides that).
Now the A320 has an advantage: 15% per flight, but considerably less on a per seat basis. This kind of explains why Boeing (at least officially) thinks they can forego the reengining and work with incremental improvements instead to match the A320 costs on a per seat basis.
But as fuel costs will rise in the future (who is so optimistic to think they will stay where they are or even go down?), the advantage of the A320NEO will be harder to match. And as I explained in  A320NEO vs. B737NG+, lower noise fees in Europe and elsewhere will add to the –NEO’s advantage. So it is not yet clear, that Boeing will not do a reengining of the. Lately, Boeing hinted that a decision will only be taken in 2011, so they might wait for the acceptance of the NEO and what Airbus will build into that upgrade besides the new engines.
Ad the Economist wrote last week, the decision at Airbus to go-ahead with the reengining is due tomorrow – then the last call is with the EADS as the owner of Airbus. They have to give the green light. If it is given, we can expect Airbus to market the NEO in the middle of October. Expect orders – or conversions from existing orders – to roll in soon!