Southwest delays 67 Boeing 737s

Southwest Airlines

Southwest Airlines Co. will postpone delivery of 67 Boeing Co. 737 Max 8 aircraft by up to six years, pushing $1.9 billion of spending on the planes into the next decade as it focuses on near-term technology and operational improvements.

The airline also plans to accelerate six 737-800 orders to next year from 2018 to help cover the already announced early retirement of its oldest 737s. The moves are the second shakeup of the carrier’s aircraft order book since 2013 and were unveiled in a presentation to investors Thursday.

The new schedule doesn’t change Southwest’s debut as the first operator of the Max 8, Boeing’s newest version of the 737, next year. The changes will help control capital spending as Southwest invests in technology updates over the next five years that will, among other things, improve its flight operations. The carrier will debut a new domestic reservation system in 2017.

Southwest’s delayed 67 Max aircraft will be shifted to 2023-2025 from an original delivery plan of 2019-2022.

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The moves underscore the risk for Boeing and Airbus Group SE as they introduce new, fuel-efficient versions of their 737 and A320 narrowbody models, the workhorses of global airline fleet. The planemakers are also plotting bolstering singe-aisle production output to take advantage of order books largely sold out through the end of the decade.

Southwest pioneered the low-cost carrier model that helped make the 737 into Boeing’s all-time best-seller. The airline is the largest operator of the aircraft as well as one of the largest buyers of the upgraded Max, with 200 orders. But Southwest has also become one of the biggest customers of cheap, middle-aged 737s coming on to the market as airlines globally retrench or upgrade to newer versions.

Southwest will have about 723 planes by the end of this year, including two additional used 737-700s. The number of aircraft will then swing to just over 700 next year and to as many as 750 in 2018.

Also under the fleet changes, Southwest will move up 13 options for Max 8 aircraft to 2019-2020 from 2027.

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Uncertainty about Federal Aviation Administration training requirements for flying its 737-300 fleet and the 737 Max led to Southwest’s decision in April to retire the older planes by the third quarter of next year. Southwest and its pilots union also had failed to agree on terms that would have separated a group of pilots to fly only the 737-300s.

The union has asked a federal court to block the carrier from operating the Max until it’s listed in a new contract. The two sides have been negotiating a labor pact for more than four years. Chief Executive Officer Gary Kelly has said the legal dispute may threaten the airline’s ability to grow.

Southwest has consistently stuck with a forecast that the first Max will arrive in the third quarter of 2017, even as Boeing said the plane may be delivered as early as March.