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 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.