Tuesday, December 13, 2011

Southwest Airlines becomes launch customer for the 737 MAX with record order

Southwest Airlines artists impression of 737 MAX 

Boeing bagged its first firm order for the new 737 MAX fuel-efficient, narrow-body plane, as part of a USD$19 billion deal with Southwest Airlines that the jet maker calls its largest order ever.

The order for 208 narrow-body planes includes 150 MAX aircraft and puts Southwest, a loyal Boeing customer, first in line to take delivery of the upcoming revamp of the best-selling 737, which will feature a new energy-efficient engine.

The order reflects robust demand for fuel-efficient planes as the airline industry struggles to rebound from a painful downturn and cope with volatile oil prices. The Southwest deal is also one of the last major aircraft orders up for grabs from US carriers looking to replace older models.

"It's been a very good year for orders, really driven by the re-engined platforms for Airbus and Boeing," said Peter Arment, an aerospace analyst with Sterne, Agee & Leach. "We do expect that to continue in 2012."

He said Boeing would likely garner more orders for its 737 MAX from existing customers, and noted the company was currently competing with chief rival Airbus for an order from United Continental, the world's largest carrier.

Delta Air Lines ordered 100 737-900ER Next-Generation planes in August, following a giant order in July from now-bankrupt American Airlines.

The MAX orders, combined with a strong existing backlog for other 737 models, will allow Boeing to raise production rates to record levels on one of its most profitable planes, Arment said.

"Longer term, it's going to help generate some additional earnings power for the company," Arment added.


Boeing reported commitments for 948 737 MAXs and said the figure could climb to 1,500 by the end of next year. It said the Southwest deal was its largest firm order ever in dollar value and the number of planes.

Private Indonesian carrier Lion Air last month placed an order for 230 planes, including 201 of the MAX that Boeing said at that time was its largest order, but those orders were not firm.

"It truly is Christmas come early," Jim Albaugh, Boeing's chief executive for commercial planes, told a press briefing held in Dallas to announce the Southwest order.

Later on Tuesday, Albaugh said "next year looks like it's going to be a very good year as well" for orders, assuming there is no economic meltdown.

In addition to the MAX planes, Southwest also said it will buy 58 737 Next-Generation aircraft. The traditional discount carrier has a fleet of 699 planes, including 88 Boeing 717s acquired when it bought AirTran this year.

Boeing said the MAX, which is competing with Airbus's re-engined A320neo family, cuts fuel burn by an additional 10 percent to 12 percent over current single-aisle planes. CFM International is providing the MAX engines.

Boeing on Tuesday also announced inaugural list prices for its 737 MAX aircraft. The 737 MAX 8 will sell for a list price of USD$95.2 million, Boeing said on its website, while the larger 737 MAX 9 will sell for USD$101.7 million.


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