BA Boeing Co

By Alison Sider 

Southwest Airlines Co. on Monday said it is buying 100 new Boeing Co. 737 MAX jets, a boost for the plane maker, which lost hundreds of orders during a prolonged grounding of the troubled jet and reduced demand for travel during the coronavirus pandemic.

The order for the MAX 7 jets, the smallest MAX variant, means Boeing will retain its lock on one of its most important airline customers. Southwest's fleet is made up entirely of 737 jets, but the carrier had been re-evaluating that strategy.

For Boeing, the deal -- the largest MAX order since U.S. regulators lifted a flight ban last year -- marks a win after a series of setbacks in recent years, including the nearly two-year grounding that followed two 737 MAX crashes that claimed 346 lives.

Boeing shares rose 2.3% to $250.44 Monday morning.

Southwest executives have long held that flying just one type of plane helps simplify operations and keeps a lid on the costs of maintenance and training. The airline is the biggest buyer of Boeing's 737 MAX jets, but the MAX debacle threw that into question.

While Southwest Chief Executive Gary Kelly said throughout the grounding that he had confidence in Boeing and the MAX, he also expressed frustration that the situation had stymied Southwest's growth and said the company had an obligation to debate the merits of sticking to a single fleet type.

"This sort of illustrates the risk of having all of your eggs in one basket," Mr. Kelly told analysts and investors early last year.

With a need for a small plane to replace older jets it planned to retire, Southwest had also been considering Airbus's A220, executives have said.

Some of Southwest's own internal calculations concluded that Airbus's A220 offered better economics and lower per-trip costs, according to an analysis viewed by The Wall Street Journal. Still, Mr. Kelly had maintained that the complexities introduced by a second aircraft type would be a difficult hurdle to overcome.

"This was our preference all along," Mr. Kelly told Southwest employees in a message Monday. "We needed to make sure the MAX 7 is the best aircraft in its 150-seat class. We are very comfortable that it is."

An Airbus spokesman declined to comment on Monday.

The U.S. approved the MAX for passenger jets again late last year, requiring the plane to undergo software updates and pilots to go through additional training, among other measures. Southwest started flying its MAX jets again earlier this month.

Other carriers have also been scooping up MAX orders. United Airlines Holdings Inc. earlier this month announced it would buy 25 additional MAX jets and brought forward orders for dozens more. Ryanair Holdings PLC said in December it had agreed to buy 75 new MAX jets from Boeing.

Losing business from Southwest would have been a major blow to Boeing, which has been struggling with airplane sales amid the pandemic. The manufacturer has said customers canceled orders for over 500 MAX jets last year, with hundreds more in question as the coronavirus pandemic has reduced travel demand and forced airlines around the world into retreat. Boeing has also been looking for customers to take finished MAX jets whose original buyers walked away or deferred their orders.

On Monday, Boeing commercial division chief Stan Deal said the Southwest agreement ensures the plane maker will be building 737s for the carrier for years to come, bringing more stability.

The MAX 7 has a list price of nearly $100 million, but airlines typically get steep discounts for large orders.

Southwest's first 30 MAX 7 deliveries are scheduled for next year. The airline said that it had also converted 70 orders for the larger MAX 8 variant to orders for the MAX 7 and added options to purchase an additional 155 MAX 7 or MAX 8 aircraft in the coming years under the agreement announced Monday.

With the order-book additions and revisions, Southwest has 349 MAX firm orders and 270 MAX options for MAX 7 or MAX 8 for 2021 through 2031, it said.

--Dave Sebastian contributed to this article.

Write to Alison Sider at alison.sider@wsj.com

(END) Dow Jones Newswires

March 29, 2021 13:25 ET (17:25 GMT)

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