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Southwest Order Update: More Than 90 737NGs

Thu Jun 29, 2000 8:32 am

Southwest Airlines Co. will announce as soon as tomorrow that it will buy more than 90 Boeing Co. planes for about $4 billion in the low-fare airline's largest order ever, people familiar with the matter said.

The No. 7 U.S. carrier also plans to take options and other purchase rights that could boost the total order to about 300 aircraft, with deliveries expected through 2012, the people said. Southwest and Boeing officials declined to comment.

The order is a sign that 29-year-old Southwest, among the fastest-growing U.S. carriers, expects to continue expanding as it presses into new markets on the East Coast. For Seattle-based Boeing, the order is an important victory over rival Airbus Industrie. Southwest flies only Boeing 737 jetliners.

The carrier ``has clear growth plans plus a sizeable fleet of older planes which must eventually be phased out,'' said Richard Aboulafia, director of aircraft consulting at the Teal Group in Fairfax, Virginia. ``It makes sense to stake out good positions on the production line.''

Southwest is buying Boeing's 737-700 models, a medium-range jet that seats 126 to 149 people. The Dallas-based carrier configures the planes to seat 137 passengers in a single class. Southwest plans to use the jets to open new routes and eventually replace older 737-200, 737-300 and 737-500 aircraft.

Southwest Expansion

Southwest has been growing at more than twice the rate of most U.S. competitors as it expands into new cities, such as service from Buffalo, New York, announced last week. It's been buying more planes to serve the new routes.

As of the end of March the airline operated 315 Boeing 737s, up 9.8 percent from March 1999. Southwest flies just one type of plane because it believes the strategy simplifies maintenance, training and scheduling. The practice also can speed turnaround times at airport gates.

Passenger demand has kept pace with growth. In May, for instance, Southwest raised its available seating capacity by 15.5 percent and passenger traffic rose 16.1 percent.

The airline's capacity increased 11.2 percent last year and is slated to grow 12 percent this year, according to the company's annual report. Southwest has said it anticipates growing at least 10 percent annually in the future.

``Southwest needs this order to maintain their 10 percent growth'' rate, said PaineWebber analyst Samuel Buttrick.

Loyal to Boeing

The carrier is among Boeing's most loyal buyers. Southwest was the first customer for the 737-700 in 1993, placing what was at the time its biggest order ever for 63 of the planes. It agreed to buy 59 more in January 1998.

The order is nevertheless a boost for Boeing, helping it meet or exceed a forecast to at least keep production stable next year. It also gives Boeing a large sale of its 737 aircraft to counter the rival Airbus A320, which has won a foothold with U.S. carriers including UAL Corp.'s United and US Airways Group Inc.

``There's nothing particularly magic about the A320 -- the 737 makes money as well'' for the carriers that fly them, Aboulafia said. ``When it comes to bragging rights, this will be a real plus for Boeing.''

The order's value is based on the average list price of $47.5 million for each plane, though buyers typically receive undisclosed discounts.

The Dallas Morning News reported last week that Southwest planned to order ``significantly more'' than 50 Boeing planes.

Boeing shares rose 1/2 to 40 1/2 on the New York Stock Exchange, while Southwest was unchanged at 19 1/2.
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RE: Southwest Order Update: More Than 90 737NGs

Thu Jun 29, 2000 8:39 am

Another milestone for the 737 line and Southwest. I must say I enjoyed Aboulafin's comments on the A320  
"History does not long entrust the care of freedom to the weak or timid." D. Eisenhower
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RE: Southwest Order Update: More Than 90 737NGs

Thu Jun 29, 2000 10:54 am

There seem to be some serious orders pending for Boeing. This one in particular ought to put them well ahead by mid-summer. Maybe they can end the year with a significant lead in marketshare and squash all this lunatic talk of their imminent demise.
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RE: Southwest Order Update: More Than 90 737NGs

Thu Jun 29, 2000 11:06 am

Wingman, there are many rumors going around that Boeing is about land a very large number of 757-300, 767-400, 777-200 long range, 777-300 long range and Next-Generation 737 orders, all to be announced at the Farnborough Air Show.

Don't be surprised that Rolls-Royce may announce a "Trent 1000" engine for the long-range 777 planes during the Farnborough show, and these will power the large number of 777 long-range models that British Airways will buy.

RE: Southwest Order Update: More Than 90 737NGs

Thu Jun 29, 2000 12:18 pm

If these orders are true, these dampens the 60 percent market share that a certain executive from Toulouse have been predicting lately.
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RE: RayChuang

Thu Jun 29, 2000 11:25 pm

I don't believe that Rolls-Royce will power the LR 777's as GE has an exclusive supplier agreement with boeing for these a/c (they put up some funds for development of the a/c)

Don't know the specific terms of the agreement, but AFAIK it would preclude any other engine from being used on the 777LR's

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RE: Southwest Order Update: More Than 90 737NGs

Thu Jun 29, 2000 11:57 pm

I know RR had done advanced development work on the LR version of its 777 powerplant before the GE deal. I wonder what Boeing would do if BA said they'd buy 30 346s instead of 30 777LRs if they didn't put RRs on them. I'd like to see Condit on that day. He'd look like a dog in a round room looking for a corner to pee in. I suppose it'd be up to GE at that point.
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RE: Southwest Order Update: More Than 90 737NGs

Fri Jun 30, 2000 12:08 am

In the contract Boeing stipulated that if airlines wanted another engine and if a certain amount of planes weren't ordered within a certain amount of time from launch that GE no longer had the right to be exculsive. I'm pretty sure its in there.

RE: Southwest Order Update: More Than 90 737NGs

Fri Jun 30, 2000 1:36 am

DelltaAir December 2000

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