Southwest Airlines (WN, Dallas Love Field) has agreed with Boeing (BOE, Washington National) to convert orders for nineteen B737-7s into B737-8s to be delivered in 2025, the company revealed in its first quarter 2024 financial results.
The agreement was struck as a result of the manufacturer’s ongoing delays “in fulfilling its commitments with regards to delivery of certain B737 MAX aircraft to the company,” the airline explained. It reduced Southwest’s contractual commitments to receive 59 MAX 7s in 2025 to 40 while increasing its MAX 8 commitments from zero to 19.
The carrier is expected to be the launch, and by far the largest, customer of the delayed MAX 7 type, and it no longer expects to take any of the 288 firm orders for this variant until late 2025 or maybe 2026, ch-aviation reported earlier this year.
As of March 31, Southwest had 694 aircraft on order, including firm orders and options. It had 85 contractual deliveries lined up for 2024, including twenty-seven -7s and fifty-eight -8s. However, this number has been drastically reduced due to Boeing's internal problems.
“We began the quarter with the expectation to receive 79 of our 85 contractual deliveries in 2024. That number dropped to an expected forty-six MAX 8 aircraft at the timing of our March 8-K and has since reduced even further to a conservatively planned twenty MAX 8 aircraft deliveries,” Tammy Romo, Southwest's executive vice president and chief financial officer, said.
The Texan LCC took delivery of five MAX 8s in the first quarter of 2024 and it now has 288 MAX 7 firm orders, 207 MAX 8 firm orders, and 199 options for either type, with the flexibility to designate them depending on its needs.
To reduce the impact of the delivery delays, Southwest plans to hold on to an additional fourteen B737-700s that were originally intended to retire this year. This will reduce the carrier’s previous expectation of 49 aircraft retirements to 35.
Closing ops at four airports
During the quarter, the airline began intensifying its network optimisation efforts, addressing underperforming markets to improve its financial performance.
“Consequently, we have made the difficult decision to close our operations at Bellingham, Cozumel, Houston Intercontinental, and Syracuse Hancock International,” said Bob Jordan, president and chief executive officer. Southwest also began significantly restructuring other markets, particularly by implementing capacity reductions at Atlanta Hartsfield Jackson and Chicago O'Hare.
Southwest Airlines expects to contribute between USD1 billion and USD1.5 billion through this and other initiatives in 2024 year-over-year pre-tax profits. The company posted a USD231 million net loss in the first quarter of this year.
