Southwest Claims Boeing 737 Max Crown with $4.7 Billion Deal

(Bloomberg) -- Southwest Airlines Co. is set to become the largest customer of Boeing Co.’s 737 Max with a new deal for 40 of the single-aisle aircraft, worth $4.68 billion before the customary discounts.

The Dallas-based budget carrier plans to take 10 additional deliveries a year of the newest 737 Max 8 model from 2019 through 2022, Southwest said in its earnings release Thursday. It’s also accelerating shipments of five Max 8s, originally due to arrive next year, to the fourth quarter.

The deal flurry from the largest 737 operator comes as Boeing is mulling whether to speed work in its factory in the face of delays at two crucial Max suppliers: Spirit AeroSystems Holdings Inc., which manufactures about 70 percent of the aircraft frame, and enginemaker CFM International Inc., a General Electric Co.-Safran SA venture.

The latest deal, which was struck last month, is the second Max order placed by Southwest since the carrier began flying the upgraded jet in late 2017. All told, the airline has exercised options for 80 additional Max since December, bringing its order tally to 280 as it swaps older jetliners for newer, larger and more fuel-efficient planes. The strategy improved a measure of fuel efficiency by 1.3 percent during the first quarter.

Upgrading Fleet

As the world’s two largest planemakers lay plans to speed production of single-aisle aircraft, Boeing and Airbus SE have been weighing the inevitable disruption to suppliers against a record order backlog and continued strong sales. The passenger jets serve as workhorses for discount carriers worldwide.

Airbus has set a new target with suppliers to lift its A320 production rate to 63 aircraft a month by the second quarter of 2019, up from a previous goal of 60. It’s a small but significant move toward boosting rates as high as 70, a number the planemaker says is supported by demand.

Meanwhile, Boeing is plotting to hike output of the 737 to a 57-jet monthly pace next year, 10 more aircraft than its current pace. Chief Executive Officer Dennis Muilenburg won’t say if the Chicago-based planemaker will push higher.

“We continue to assess the upward market pressure on the 737 production rate,” Muilenburg said during Boeing’s earnings call on Wednesday.

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