Southwest Airlines (WN, Dallas Love Field) has firmed a total of sixteen B737-7 options albeit in two batches of eight units, one in the third quarter of 2021 and the other on October 1, as it looks to accelerate the phase-out of its B737-700s.
In its quarterly earnings report, the low-cost carrier said the first octet of incremental B737-7s would be delivered in 2022 and the other eight in 2023.
Following the conversion of the options, Southwest Airlines has outstanding confirmed orders for 250 B737-7s. Subject to the certification of the type by the US Federal Aviation Administration (FAA), deliveries are due to begin in early 2022 and continue through to the end of 2030, the ch-aviation fleets module shows. The portfolio of aircraft includes 248 new units and two previously used as testbeds by Boeing. Southwest Airlines said it also has 149 outstanding orders for B737-8s in addition to the 69 units of the type already delivered. No further B737 MAX deliveries are scheduled for 2021. The deliveries of -8s are scheduled to resume in 2026 and conclude by the end of 2031. Beyond the confirmed orders, Southwest Airlines has a further 252 B737 MAX options (-7s and -8s) that, if converted, would deliver between 2022 and 2027.
"We currently have 72 firm orders and 42 options next year, and we will continue to evaluate option exercises as decision points arise. Regardless of our capacity plans next year, we continue to believe that taking the additional 2022 options will yield a positive net present value on aircraft replacement if we don't deploy them in the network," Chief Financial Officer Tammy Romo said during the ensuing earnings call.
The carrier plans to replace the bulk of its B737-700s with the forthcoming MAX. It currently operates 462 -700s, making it by far the largest operator of the type globally (United Airlines, the second-largest, has just 53 in its fleet). It said that as of September 30, twenty-four -700s remained in long-term storage due to the impact of the COVID-19 pandemic on its network. The airline expects to return one leased -700 and retire eight owned units of the type by the end of the year. The decision to retire the owned aircraft was taken recently as they were originally scheduled for phase-out in 2022.
According to the ch-aviation fleets ownership module, Southwest Airlines owns the bulk of its -700s and leases 88 units. On top of the -700s and the MAX 8s, the airline's fleet also comprises 207 B737-800s.
During the earnings call, incoming chief executive Bob Jordan said Southwest expects 2022 to be a "transition year" ahead of a full recovery in 2023 and beyond. While it has been gradually rebuilding its network, Southwest said its total capacity in the fourth quarter of 2021 would be 8% lower than pre-pandemic and in the first quarter of 2022 - 6% lower. The LCC posted a net loss of USD135 million in the third quarter of 2021 and a cumulative USD1.36 billion loss for the first nine months of the year.
