Southwest launches the B737MAX-7

Yesterday Boeing and Southwest Airlines announced that SWA will be the launch customer of the B737MAX-7. The launch of the B737MAX-7 with an order for 30 aircraft of that type comes with
  • a cancellation of 30 orders for the B737-700NG
  • Southwest substituting 5 -700NG to the -800NG variant
  • Southwest firming 5 options for the -800NG
  • the cancellation of 5 options for NG aircraft
Southwest will therefore take 146 B737NG between 2013 until 2018 (137 aircraft from today as 9 have already been delivered this year), 25 less than planned before. Southwest says they are saving $500million by that, implying a price of $40 million per aircraft (no surprise here...).

So Boeing now has a launch customer for the -MAX7. Of course we can't know the exact wording of the contract, but, anyway, the customer is the king and here is my two cents worth of thoughts for that:
Could it be that Southwest agreed to be the -MAX7 launch customer only to get rid of "surplus" B737NG (in particular -700NG) orders? Is there some provisioning in the contract to switch these -MAX7 orders to the -MAX8 variant just as Southwest now is constantly switching -700NG orders over to the -800NG? And even if there is no provisioning in the contract today - the possibility to do so was integrated into the current -NG contracts just about 2 years ago.
Southwest has taken only few -700NG's since the first -800NG arrived: 11 in 2012 after 19 in 2011, They won't take any in 2013 and 2014. In contrast Southwest integrated 30 -800NG into the fleet in 2012 and 9 this year with another 9 to follow until December and another 36 in 2014.
The reason to prefer the -800Ng is clearly unit cost! With 175 seats the fixed costs like pilot salaries are shared by 27% more seats that can be filled. Most of the low cost competitors are flying larger aircraft than the -700NG, like the A320 (Jetblue, Virgin America, Spirit). Also the A319 is a little bit larger than the -700NG, so it has a competitive disadvantage.

First delivery of the B737MAX-7 is planned for 2019, so we have to wait about 6 years to know if yesterdays order for the -MAX7 will really lead to deliveries of that aircraft.

Another "first" here is that Boeing agreed to convert orders for the -NG to the -MAX. Airbus until today  refused to convert existing orders for the A320ceo to the A320neo and at least officially there is no case known until today where Airbus did that. Now that Boeing has a first exemplar of order conversion it is possible that more customer will ask for a conversion.

UPDATE. I have to stand  - at least partially - corrected: Southwest also said that they will buy 10 used B737-700NG for delivery in 2014 and 2015. My strong guess is that these will come from WestJet.

1 comment:

  1. Well, after acquiring AirTran Airline, there were a bunch of lower capacity jets (717) than the 737-800NG. I believe that the need for this capacity wise planes still will exits for some routes in the foreseeable future. There is also the question of range that a 737-800 does not have compare to the -700. If one plane is needed for that particular distance and not a lot of traffic, then the 737-700NG will be the plane to handle it for SW.