Boeing's Smallest 737 Max Faces New Doubts as a Key Buyer Wavers
(Bloomberg) -- WestJet Airlines Ltd. is outgrowing its crush on Boeing Co.’s Max 7 jet, adding to concerns about the future of the smallest member of the 737 Max family.
The Canadian carrier is switching its focus -- and some of its orders -- to larger, more fuel-efficient versions of the plane that fit better with its cost-cutting goals, Chief Executive Officer Ed Sims said Wednesday. WestJet’s shift would dent Boeing’s backlog of orders for the Max 7 as other carriers veer toward bigger siblings such as the Max 8 and 10.
“We are really focusing now on the Max 8, which has got extended range and greater seat capacity,’’ Sims said in an interview at the carrier’s Calgary headquarters. “We really converted on our initial options and our interest in the Max 7 into the Max 8, and we’re now evaluating the next generation of Max, which is the Max 10.’’
The budget airline is postponing its initial five deliveries of the Max 7 by two years to 2021, casting a cloud over the jet’s scheduled debut later this year. WestJet and Dallas-based Southwest Airlines Co. are the main customers for the variant, which is the slowest-selling of Boeing’s upgraded 737 planes. Southwest has ordered 30 of the Max 7 aircraft, and 219 of the Max 8.
Over the course of 2018, WestJet converted five Max 7 jets that were scheduled for short-term delivery into Max 8 models, spokeswoman Laurent Stewart said in an email. At the same time, WestJet also converted four Max 8 aircraft that were scheduled for delivery after 2025 into Max 7s, she said. That amounted to a net decrease of one plane in the Max 7 order, in addition to the delivery delay.
Boeing declined to comment.
According to a filing this week, WestJet’s fleet in 2027 is still slated to include 22 Max 7s, along with 20 Max 8s and 12 Max 10s. But some of the planned Max 7 deliveries might be converted into Max 8 and Max 10 orders in the next three years, Sims said.
Competition in the narrow-body segment is fierce. Airbus SE’s A220 and new models from Brazil’s Embraer SA are jockeying for sales in the same sliver of the market as the Max 7: jets that seat between 130 and 150 travelers. The Max 8 seats as many as 178 passengers in a dual-class cabin, with the Max 10 carrying up to 204.
Sims is counting on the larger variants of the 737 to reduce fuel consumption and help WestJet in its push to achieve annual savings of as much as C$200 million ($151 million) by 2020. The CEO sees additional efficiencies from the deployment of 10 Boeing 787 Dreamliners as WestJet expands long-distance service and introduces a business-class cabin.
“We really want to evaluate the Max 10,’’ Sims said. “It’s got significant additional seat capacity -- up to 30 extra seats -- and at least the same level of range as the Max 8. The beauty for us in the Max is essentially it’s a narrow-body Dreamliner, so it is easily capable of operating transatlantic.’’
The carrier is scheduled to start Dreamliner service between Toronto and Calgary Feb. 20. Trans-Atlantic operations with the new jet will begin in April.
WestJet will consider exercising options to purchase 10 additional Dreamliners over the next few years, Sims said. Option conversions will be evaluated at six-month intervals as the carrier gains a better understanding of the advanced wide-body plane, he said.
“Personally I love the ambition of getting to 20’’ Dreamliners in the fleet, Sims said. “I think that’s what we need to be doing to fully establish ourselves as a global network carrier.’’
The CEO tempered that ambition with caution. “In many ways we are doing this for the first time in terms of full premium service and all of the feed from the international networks into Canada, which is still relatively new for us,’’ he said. “So we’re not going to rush into that decision.’’
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