Southwest in Talks With Boeing for Additional 737 Max Jet Orders

(Bloomberg) -- Southwest Airlines Co. is considering an order for “more than a handful” of Boeing Co.'s 737 Max aircraft as the nation's largest discount carrier benefits from lower tax rates and expanding travel demand.

Discussions with Boeing are ongoing, Southwest Chief Executive Officer Gary Kelly said Tuesday without specifying a number for a potential order. The CEO reaffirmed that the airline would potentially add as many as 500 more planes in the long-term future.

Kelly's comments underscored Southwest's plans for growth as it experiences a dip in its fleet after retiring a group of its oldest 737s late last year. The CEO said in December that Southwest intended to use some savings from the reduction in corporate tax rates to expand its 706-plane fleet or replace aging aircraft.

“I don't expect that we would have access to any more deliveries this year, so it probably would begin no earlier than next year,” Kelly said at the opening of the carrier's new $250 million pilot training and flight operations center. “With the extra capital, we are working on ways to better serve our customers and the first place we want to look is to continue to modernize our fleet.”

Outstanding Orders

Southwest has 227 unfilled orders for the Max, the newest version of Boeing's best-selling jet, according to Boeing's website. The carrier, which was the launch customer for the upgraded 737, has taken deliveries of 13 of the aircraft so far. Southwest is the largest operator of Boeing 737s.

The airline in January converted existing options to firm orders for 40 Max 8 aircraft, while delaying deliveries of 23 Max 7s, the smaller variant, until 2023 and 2024. Taking the additional Max 8 planes in 2019 and 2020 means Southwest will receive some of that model every year through 2025.

The carrier remains on track to receive federal regulatory approval to operate flights from the U.S. west coast to Hawaii, Kelly said. If certification is received by October, Southwest should fly to the island state by the end of this year, he said, “but there are no assurances that will happen.”

Southwest plans to serve “multiple” destinations in Hawaii and still is considering flights among the islands, an idea that “we've become more intrigued with,” Kelly said.

--With assistance from Julie Johnsson

To contact the reporter on this story: Mary Schlangenstein in Dallas at maryc.s@bloomberg.net.

To contact the editors responsible for this story: Brendan Case at bcase4@bloomberg.net, Susan Warren

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