Bloomberg News

Southwest Adds Boeing MAX in $17.6 Billion Order for 208 Jets

December 16, 2011

Dec. 13 (Bloomberg) -- Southwest Airlines Co. became the first carrier to order Boeing Co.’s 737 MAX, purchasing 150 of the more-efficient planes and 58 other 737 jets with a combined value of at least $17.6 billion.

MAX deliveries will start in 2017, and the deal includes options for 150 more, Southwest said today in a statement. Airlines typically buy at a discount to the list price, which is $84.4 million for the 737-800 model and hasn’t been announced for the MAX.

Upgraded engines on the MAX are supposed to help cut fuel use as much as 12 percent compared with the current 737, Chicago-based Boeing says. Airbus SAS decided in December 2010 to equip its rival A320 with new engines, giving the European planemaker a head start in signing up customers.

Buying 737s extends Southwest’s status as the world’s largest operator of the plane and its commitment to flying only Boeing aircraft. It is the fourth time Southwest has served as the initial customer for a version of the 737, the industry’s most widely flown jetliner.

Engine efficiency is important to Southwest, because fuel spending has surpassed labor to become the carrier’s largest cost after a 59 percent jump in prices through yesterday from five years earlier.

Except for 88 Boeing 717s, Southwest’s fleet of 699 jets consists entirely of 737s. The biggest low-fare airline acquired the 717s when it bought AirTran Holdings Inc. in May and has said it has no plans to keep the smaller planes when they come off leases at the end of 2024.

Orders in Place

Southwest has said it had 142 firm orders in place for 737-700 and -800 versions for delivery through 2017.

The 737-800 has 175 seats, 28 percent more than the -700, Southwest said last year when it agreed to take the larger version of the plane. Seating configurations for the MAX haven’t been released.

Boeing announced the MAX in July, when American Airlines agreed to buy 460 single-aisle jets, including 260 A320s and 200 737s, plus options and future purchase rights for 465 more planes. American’s commitment is to include 100 MAX models, with the first delivery in 2018. No firm orders have been placed.

After Airbus announced its A320 neo, Boeing said it preferred developing an all-new successor for its single-aisle jet over engine upgrades. Boeing switched course in mid-2011 as neo orders surged and airlines such as Southwest pushed for faster fuel-efficiency gains amid the planemaker’s uncertainty over the production system needed for the new jet.

CFM International, a partnership of General Electric Co. and France’s Safran SA, is developing a customized engine for the 737 MAX.

--Editors: Ed Dufner, James Langford

To contact the reporters on this story: Mary Schlangenstein in Dallas at maryc.s@bloomberg.net; Susanna Ray in Seattle at sray7@bloomberg.net.

To contact the editor responsible for this story: Ed Dufner at edufner@bloomberg.net


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