Southwest Adds Boeing MAX in $17.6 Billion Or
 

Southwest Adds Boeing MAX in $17.6 Billion Order for 208 Jets - Bloomberg

Good luck at negotiations for the next contract fellas. :(

Why the 'sad face' regarding future contract negotiations?

Because management has already hinted that they're going to be asking for concessions or at least no raise at the next round, and this aircraft purchase is going to be their leverage. Remember how American dropped a ** ton of cash on airplanes and then declared bankruptcy in the same year? hey wait, that was THIS year.

how much cash do you have to "drop" for and order on a plane that wont be here for 6 years?

A few hundred million probably. But that $17.6 billion is factored into the long term projections of the business, just like labor costs are. Labor costs are likely to go under attack before fleet renewal costs do, any day of the week.

When they come to the table, they're going to say "here are our expected budgets for the next xx years, so here's what we need from you guys." More airplanes on order = less money in the future to pay pilots. Welcome to the industry.

Southwest $19 Billion 737 MAX Order
 

Southwest Adds Boeing 737 MAX With Record $19 Billion Jet Order - BusinessWeek

Southwest Adds Boeing 737 MAX With Record $19 Billion Jet Order


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Dec. 13 (Bloomberg) -- Southwest Airlines Co. became the first carrier to order Boeing Co.'s 737 MAX, purchasing 150 of the more-efficient planes and 58 other 737s in the largest aircraft order ever.
MAX deliveries will start in 2017, and the deal includes options for 150 more, Southwest said today in a statement. The order is valued at almost $19 billion at list prices, which are usually discounted for airlines. The MAX's three variants are priced from $77.7 million for the smallest to $101.7 million for the largest, Boeing said today.
Upgraded engines on the MAX are supposed to help cut fuel use as much as 12 percent compared with the current 737, Chicago-based Boeing says. Airbus SAS decided in December 2010 to equip its rival A320 with new engines, giving the European planemaker a head start in signing up customers.
“Southwest has done everything they can to lower costs on operations and on labor, so it comes down to equipment and technology and fuel savings,” said Richard Aboulafia, vice president of consultant Teal Group in Fairfax, Virginia. “It's a very strong endorsement for the MAX.”
The firm order for 208 planes is the largest in Boeing's history, the planemaker said. It also eclipsed Airbus's record order for 200 planes from AirAsia Bhd earlier in June.
Southwest climbed 0.8 percent to $8.50 at 10:44 a.m. in New York trading, while Boeing increased 2 percent to $72.34.
Buying 737s extends Southwest's status as the world's largest operator of the plane and its commitment to flying only Boeing aircraft. It is the fourth time Southwest has served as the initial customer for a version of the 737, the industry's most widely flown jetliner.
Fuel Efficiency
“The much improved fuel efficiency of the 737 MAX will enable us to improve our fuel costs as well as our environmental performance,” Mike Van de Ven, Southwest's chief operating officer, said in the statement. The plane will have operating costs 7 percent below the competition, the airline said.
Engine efficiency is important to Southwest, because fuel spending has surpassed labor to become the carrier's largest cost after a 59 percent jump in prices over five years. Chief Executive Officer Gary Kelly warned employees earlier this month that the carrier was facing increased pressure to cut operating expenses because its cost advantage over peers had narrowed.
‘Early Believer'
“They were an early believer that fuel prices were going to stay high,” James M. Higgins, an analyst at New York-based Ticonderoga Securities LLC, said in an interview. “This really reflects that philosophy. They seem very sensitive to the fuel price environment.”
Except for 88 Boeing 717s, Southwest's fleet of 699 jets consists entirely of 737s. The biggest low-fare airline acquired the 717s when it bought AirTran Holdings Inc. in May and has said it has no plans to keep the smaller planes when they come off leases at the end of 2024.
The new 737 orders that will be delivered before the MAX signal “the death knell for the 717 in their fleet,” said Higgins, who recommends buying Southwest stock. “Those aircraft are going to be 717 replacements.”
Southwest's firm orders for Boeing aircraft grew to 350 from 142 with today's addition, and deliveries are scheduled through 2022. Most of the new planes will serve as replacements for existing older aircraft, the carrier said.
Southwest also now holds 242 options for additional aircraft that would be delivered from 2014 through 2027.
Boeing Strategy
The current 737-800 has 175 seats, 28 percent more than the -700, Southwest said last year when it agreed to take the larger version of the plane.
After Airbus announced its A320 neo, Boeing said it preferred developing an all-new successor for its single-aisle jet over engine upgrades. Boeing switched course in mid-2011 as neo orders surged and airlines such as Southwest pushed for faster fuel-efficiency gains amid the planemaker's uncertainty over the production system needed for the new jet.
Southwest's new planes will carry engines valued at $4.7 billion from CFM International, a partnership of General Electric Co. and France's Safran SA. CFM is the exclusive engine provider for the 737, including the new MAX.
Southwest's jet order is the largest this year by value, followed by a November order for Boeing 777s from Emirates worth $18 billion at list prices.
In July, American Airlines agreed to buy 460 single-aisle jets, including 260 A320s and 200 737s, plus options and future purchase rights for 465 more planes. American's commitment is to include 100 MAX models, with the first delivery in 2018.

Negotiations will be tough....they're ALWAYS tough with this mgmt. We're already leading the industry with our current contract, so big gains were pretty unlikely from the git-go (unless of course those Delta boys can "take it back" but that's sounding less and less likely if the chatter on L&G is to be believed). AA's pilots about to take it in the shorts is not going to be helpful either. But I don't see this aircraft order being as big a hammer as you apparently do. They need new airplanes very soon and every new one will save a buttload of (increasingly expensive) fuel over it's life vs. the aircraft it is replacing.

I think it is gonna be difficult for DAL to make any significant gains, especially since as you point out, AA is about to get hammered, which will significantly harm all the other carriers, except for SWA of course... so does that mean you think that SWAPA can actually raise the bar for once?

Like every other company on the face of the earth, SW uses this as a negotiating tool. We are coming up on a section 6. What better way to lower expectations than more of Gary's doom and gloom (just like last time and the time before. etc........)

SWA is the bar - today.

You may be entitled to your opinion, but not your facts. Yesterday, is yesterday. Everything ALPA did "yesterday" is moot. All those fat contracts you guys negotiated were meaningless the day you showed up to work under concessionary contracts in bankruptcy.

I am glad we are not a legacy - all "legacy" means anymore is "went bankrupt" and "we outsource our flying to regionals". You may truly feel that Southwest dragged you down yesterday, but Delta and the rest of the legacies are dragging Southwest down TODAY and in the near FUTURE.

(Reminiscing about pay rates 5 or 10 or 15 years ago, is like reminiscing about what a great football player a person was in High School. It just doesn't matter anymore.)

Given the economic realities of today, the attitudes of pilots at the legacies regarding working for less pay, and outsourcing their flying to regional pilots I think we will be lucky to keep our pay rates at Southwest.

Please, TSquare, please, please, please, negotiate a better pay rate than pitiful, old Southwest. Please do better than Southwest plus $1. (I know you "got" yours, being a wide body Captain at Delta. Great. Good for you. Clap, clap, clap, clap. The rest of us are still trying to work our way up the seniority list, feed our families, and put a little money in the bank.)