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.)

We've been holding the bar since ya'll went ch11 and we've seen nothing but enhancements to our contract in the years since. So I'll have to respectfully disagree with your premise....we've raised the bar and are continuing to do so. Hopefully that will continue into this next Sect 6. If the company expects some concessions, they need to post a whole lot worse numbers than our paper loss of last quarter.

You are exactly right. I do not argue any of what you said (sans the sarcasm) Yesterday was yesterday, and I am not pining for that. All I am saying is that now it is your turn to put up or shut up. Negotiate a bigger payrate for the MAX airplanes. Set a higher bar. We are all counting on you.

And the threadjack begins.......


As a DAL pilot,

Congratulations on the big a$$ order.

Airplane orders aren't an everyday thing. It's something to be excited about, both for Boeing and Southwest.

And contrary to popular belief, we have been garnering contract enhancements post BK too. It's just that many on here measure the value of a contract by the size of one's watch or W2. I'm not getting into that. As you said, you have "been holding" the bar since everybody went BK. Good for you. Now you have to do better. Holding it isn't good enough anymore.

Hard to raise the bar much when all the other kids on the block are paying their wide body international guys as much as SWA is paying guys to do the Texas 2 step.

Are you saying the bar is getting too heavy so you are going to drop it??

No - since the money saved on fuel and MX by flying new jets will keep the bar where it's at or even push it higher. The leverage the company can more easily use is that double breasted van commanders are flying bigger planes and more pax for the same money.

I agree with TS that money in the contract is not everything. I hope we can tighten near international code share and negotiate singing lessons.

That is what the hippies used to call a cop out. Isn't SWA this all powerful kumbaya singing (no lessons needed Rolf) company that always pays it's employees better... treats them better... wants them always happy? Getting a stellar rate on the 737Max should be a walk in the park.

This is too funny to read...

Delta guys giving Southwest trouble for not raising the bar. Wow!!!

I don't think the worlds highest paid narrow-body pilots have anything to prove here. It is a little past due for the Delta boys to step up to the plate. Even just showing the smallest bit of a fight would be nice. How about start with freezing the scope erosion.

You guys lowered the bar and now you blame the highest paid pilots for not raising the bar higher. What is next, do you need them to come over to Atlanta to do the negotiating for you?

The problem with getting a "stellar" rate is the only example (those previously known as legacies) we have is that it hasn't lasted very long. So TS, please tell us what a stellar rate would be on the -800/MAX.

The Oscar

That is a really good question. And at the risk of a "cop out" myself, I will say that I do not know. We have rates on every airplane under the sun it seems, and personally I think we are shooting ourselves in the foot because of - the way it has always been done- being some seat/weight/speed crap formula.. which is fine if you have a bunch of your biggest airplanes... but in our case, we don't. Forgive the drift. So... since the guys that will be negotiating this in the future for US will probably do it the way it's always been done.. I would think that once our 737 rates exceed yours, your 737Max rate should probably be 10-15% above that.. but that is just an off the cuff supposition. Set the bar for the next one, that's what you need to do.

Read some history son.. then come back when you have something worthwhile to add to this discussion.

Fortunately, we are already there. We are paid better, treated better and happier. SWAPA's stance on equal pay grades for the 737 goes back to the 737-500. They wanted the same rates for an airframe with less seating capacity. Unfortunately, SWAPA carried that philosophy forward with the 800 and accepted the same pay (we did receive modest pay raises across the board for all types) for a jet with more capacity. I thought we could have and should have gotten more, but that is now in the past. The MAX will still be a 700 or 800 variant and I doubt it will warrant a re-opener. Our CBA does specifically only list rates for Boring 737-300, -500, -700, -800 and 717. Boeing says these new MAX aircraft will be a specific new type, and that alone may force a re-opener. I don't think that the airlines flying the A320 NEO will be negotiating different rates for that airframe, but you seem to disagree with that statement.

I know my history old man, and this is not your father's Delta anymore. Southwest has been top dog for more than a few years now. The pride you have for the name painted on the side of your airplane does not pay **

Furthermore, when a pilot group has the reputation that yours does (historically speaking of course), I would probably try and do my best not to live up to it.

I'm not sure which route is better. It seems to me that 1 scale to fly everything from 717s to -800 encourages the SWA to buy larger (fewer?) aircraft. Section 6 wishlist: improving near international codeshare, singing lessons (trust me, TS) and a shrubbery!

What does any of this have to do with the topic at hand?

Good point. Delta has nothing to do with this topic. Congratulations to Boeing and Southwest on the huge aircraft order and the bright future that this news brings to both companies!

So you think the -MAX rates will essentially be an extension of the -500 rates? This is very interesting. Guys at DAL are all abuzz because they think that an airframe that is more efficient should pay more than a current model. i.e.. The 787 is really nothing more than a 767 on steroids. Similar seat count, but l o n g e r legs... therefore it should (and does) pay more (by some's measure). As to the NEO rates, I have not a clue. If the common mantra of being paid more for being more efficient holds true, then yes I think they will be renegotiating that rate. Personally, I think different payrates for different airplanes is a crock, and it ultimately holds back one's career earnings.. but that's just me. (even though I have numbers to prove otherwise)

This is the crux of a discussion that I get into over at DAL. The other side says just the opposite of what you just said however. They say that since all captains are paid the same, the company would go with more Barbie jets since a 747 captain and a RJ captain would be paid the same.. I fail to follow THAT logic.. but.. what you say seems more likely to me.. except that big airplanes are expensive. who kjnows. Interesting though.... My POV is that aircraft purchases are a management decision, and we have no say in that process. meh.. I'm not gonna get into that discussion here since it is not really germane to this one.. but it is interesting that your current rates are an extension of the -500 rates...

Well, perhaps you do it very differently at Delta, but at SWA we do it by aircraft type. We have rates for specific different types of aircraft. As I understand it the 767 and the 787 are completely different aircraft and are type certificated as such. If Boeing type certificates the MAX as a different aircraft our CBA states that a re-opener will be required since we only have rates of pay for the airframes I listed previously. The -500 rates are the same as the -800 rates, so yes I think the MAX rates will be an extension of the -500, but I would guess you already knew that and are trying to make it sound sensational.

Hey, don't forget us United-Continental pilots who are in tough negotiations trying to "take it back" as well. We are all counting on each other.

My philosophy still remains the same: just because some other company (airline in this case) can't manage the business properly and files for bankruptcy doesn't mean the rest of that industry (other PROFITABLE airlines in this case) can't get pay raises.

UCAL Mgmt: "Well, you know AMR filed for Chapter 11."
Union: "What's your point?"
UCAL Mgmt: "The point is their high costs made them lose money."
Union: "So? Our low costs lead us to a $1.5 billion profit this year."
UCAL Mgmt: "Hey, you know we could order some new planes!"
Union: "Great! While your at it, FUPM!"

No.. no sensationalism.. just trying to understand if you can raise the bar, and if not.. why. That's all. And are you saying that a 737 is a 737 is a 737? Variant has no bearing on pay? I certainly hope that is not the case, because we have 737-900s coming with 200+ seats... But when an industry is looking at the "leader" we expect to be led. Spin it how you want.

I really didn't finish my thought about the 787 vis-a-vis the 767. What I meant to say is that it essentially seats the same number of people, but has greatly increased range. However, it still has 2 throttles, 2 pilots yada yada yada...

+1. WE are expecting big things from UCal too :)

It will still be a 737-700 or -800 flying the same stage length so asking 10-15% more would be totally idiotic - an across the board COLA raise for all would be a better target in the Section 6. Swa has said nothing about buying -900s.

Perhaps you can get in touch with Boeing and ask them how they will type certificate the MAX, then share it with the rest of us then we will all know if we will be negotiating a new rate for the MAX. Which part of this do you not understand? Is it the part that we have pay rates for different types of aircraft, or that we don't yet know how the MAX will be type certificated? It all seems relatively simple to understand. Does Delta not have similar language in their CBA? Does it not state that re-openers are only required for an aircraft not currently in the contract?

You do not have different "types" You have different "variants". Look at your license. 717 excepted.

And as far as having to reopen for new aircraft.. that was given away a few years ago. Long stupid story that I am sure interests you not.

Fair enough.

You are absolutely incorrect. They are in fact type certificated differently. They do share a common type rating. The 757 and 767 are definitely certificated as different aircraft although they share a common type rating. The CRJ 50, 70 and 90 seaters carry a common type rating but are type certificated as different aircraft. If the aircraft certification lists it as a different aircraft other than the 737-300, -500 or -700 then we will be able to require a re-opener as per our CBA. If SWA decides to fly anything other than the above listed 737's, we are able to negotiate new rates for an airframe not currently listed specifically in our CBA. If you decided to negotiate that right away, how in the world do you decide the pay rate for a new aircraft. Do you just have to take whatever they give you for a pay rate then wait for section 6 to re-negotiate that rate?