Southwest Airlines has finalized a $19 billion deal for 208 Boeing 737 jets, the biggest aircraft order in history. The deal includes 150 narrow-body 737 MAX aircraft, representing Boeing’s first order for its latest fuel-efficient jets, which cost up to around $102 million depending on the version according to company catalog prices.
Southwest took an option to buy an additional 150 737 MAX models, though didn’t specify which version of the jet it would order. The Dallas, Texas-based airline also ordered 58 Next-Generation 737 jets.
Supply of the new 737s will begin in 2017.
The 208-jet order is Boeing’s largest ever, both in terms of dollar value and planes ordered. It puts the plane manufacturer ahead of its main rival Airbus, which held the previous order record for 200 jets from Malaysia’s AirAsia in June.
New upgraded engines fitted in the 737 MAX will provide a boost in fuel-efficiency and savings for Southwest’s expanding fleet, with the CFM International LEAP-1B engines reportedly consuming up to 12% less fuel than the current 737 jets.
Richard Aboulafia, vice president of aerospace market intelligence firm Teal Group, said reducing spending was critical for Southwest and that the new engines were a deal-clincher.
“Southwest has done everything they can to lower costs on operations and on labor, so it comes down to equipment, technology and fuel savings,” Aboulafia told Bloomberg. “It’s a very strong endorsement for the MAX.”
The Southwest deal comes on the heels of a $2.8 billion order from United Arab Emirates airline Etihad Airways for 10 new 787-9 planes along with two 777 cargo jets.
In July, American Airlines also announced plans for a multi-billion dollar combined order for 200 Boeing 737s and 260 Airbus A320s, though neither manufacturer has received finalized orders.
As part of its extension plan, Southwest will speed up the phasing out of older aircraft with the aim of increasing fuel efficiency across its whole fleet. The 737 MAX planes will burn up to 18% less fuel than early 717 models, which Southwest inherited with the acquisition of AirTran Holdings in May.
Southwest chief executive Gary Kelly said in a statement that technology to reduce fuel burn was one of the company’ foremost priorities. This will be Southwest’s first order for new jets since Kelly took over as CEO in 2004.
Before the announcement of the deal, Southwest was already the world’s largest operator of 737s. The new order underscores the airline’s confidence in Boeing and confirms its commitment to continuing its exclusive supply contract with the airplane maker.
Boeing recently announced its inaugural catalog prices for its new-engined 737s, with the 737 MAX 8 selling for $95.2 million and the larger 737 MAX 9 model going for $101.7 million. Airlines usually negotiate discounts from airplane manufacturers for large orders.
Key Statistics – Global Airline Industry (source: MarketLine)
- The global airline industry is predicted to reach a value of $532 billion by 2014, a rise of around 40% from 2009.
- By 2014, the global airline industry is expected to reach a volume of 2.5 billion passengers, an increase of over 27% since 2009.
- Domestic travel is the biggest segment of the global airline industry, representing almost 69% of total industry volume.
- The Americas represent almost 50% of total value in the global airline industry.