As an all-Boeing 737 operator, Southwest Airlines is a critical customer for Boeing as the US airframer works to produce higher rates of its signature narrowbody jet.
The major US airline is relying on 737 Max deliveries to enable its fleet plan, which has been reduced both by Boeing’s production struggles and its own intentional slowdown as it enacts a sweeping financial revival plan.
Southwest’s full-year investor guidance forecasts 38 737 Max deliveries, though its “contractual number” calls for 136 Boeing jets to be delivered in 2025.
The actual number of deliveries will likely exceed Southwest’s estimate but fall well short of Boeing’s contractual obligations.
“We’re not going to get 136 aircraft,” chief executive Bob Jordan said during the company’s 30 January earnings call. “But we believe Boeing is on pace to exceed 38 this year, and over the next couple of years that there will be an opportunity to do plenty of transactions as Boeing ramps up their production.”
Jordan says that he recently met with Boeing’s leadership team in Seattle and came away “encouraged by what I saw on the line processes, the procedures [and] slack time coming out of the system”.
“They have a long ways to go, but pending something we don’t know about I’m strongly optimistic they can exceed the 38 … and have upside to 50-55,” Jordan says. “That would certainly help in executing the fleet strategy.”
Southwest took only 22 aircraft in 2024, after reducing its expectations in March to 79 deliveries.
Boeing’s 737 production programme was massively disrupted last year – first by a door plug flying off the fuselage of an Alaska Airlines-operated 737 Max 9 and later by a crippling machinists’ union strike that ceased Seattle-area aircraft production for several weeks.
However, the US airframer says that it is preparing for 737 production hikes this year, with a goal of exceeding the Federal Aviation Administration-mandated cap of 38 monthly narrowbody aircraft.
“We want to get through the rate 38 approval… this year and to get to that 42 sometime this year,” Boeing chief executive Kelly Ortberg said during the company’s 28 January earnings call.
Southwest is counting on incoming 737 Max 8s to replace its older 737-800s.
Indeed, it will continue selling “excess” aircraft, according to chief financial officer Tammy Romo, particularly its 737-800s “that currently have highly favourable market valuations”.
The Dallas-based company on 7 January executed a sale-leaseback transaction involving 36 of its 737-800s with US lessor Babcock & Brown Aircraft Management.
Romo says Southwest is actively contemplating the sale of an additional 10 737-800s. That fits into Southwest’s long-term “fleet monetisation” strategy, which involves both aircraft sales and sale-leaseback transactions.
The company is planning to retire 51 aircraft this year, and to an operate an all-Max fleet by 2031.
”The more Boeing can deliver, the more we can execute this strategy,” Jordan says.
Southwest’s fourth quarter profit improved considerably over the same period of 2023, as it posted a $261 million gain, compared with its prior-year loss of $252 million.
However, the company’s full-year profit of $465 million almost exactly matched its 2023 mark.
