There are persistent rumors that Southwest is about to announce an order of hundreds of 737 MAX-7 aircraft. Such an order would be a triumph for Boeing. But is it a given?
Today, Southwest will begin operations again with its 737 MAX fleet. It comes two years and a day after the second crash, that grounded the fleet worldwide. The airline took its time preparing to fly its aircraft. This time allowed them to re-train all their pilots for the newer jets. The airline has already taken deliveries of over 50 MAX-8 aircraft, many after the ungrounding. Southwest have orders for 219 more of these, plus 30 MAX-7 aircraft.
But this analogy between Southwest’s MAX-7 and MAX-8 orders was always going to change. The airline has nearly three times as many 737-700s as they have 737-800s. That’s 474 and 207 aircraft respectively. Southwest needs a smaller jet than the MAX-8, and the MAX-7 is the natural choice. Also, the airline was a launch customer for the 737-700. Which means that a large proportion of these jets are now quite old, and ripe for replacement.
So, Southwest Must Get The MAX-7. Right?
Many assumed that Southwest’s ‘flirt’ with the Airbus A220 was nothing but a ruse. Just a way to get better terms from Boeing, for a future, big contract. A reasonable way of thinking, but it’s more complicated than that. Getting the MAX-7 would be in line with Southwest’s long-standing single-type operation model. But the airline has always looked at the longer-term picture.
And whichever aircraft they choose, Southwest know that they will eventually have more than one type. The 737 isn’t immortal. Southwest are aware of Boeing’s NMA, like everyone else. The airline doesn’t really need an aircraft that big (for now). But they know that whatever the NMA ends up being, Boeing will eventually follow with a smaller, 737 replacement. And this means that when they get THAT aircraft, Southwest will have two types in its fleet.
So choosing the A220 would not necessarily be a crazy choice for the airline. Even as the rumors for Southwest’s purchase of the MAX-7 came, their CEO, Garry Kelly, never stopped singing the praises of the Airbus. The size of Southwest’s rumored deal is for 130 MAX-7 firm orders, and 170 options. And Southwest has a history of always taking up its options! There may be some ‘white-tail’ MAX-8 jets in there somewhere, at special prices, to sweeten the deal.
A Must For Boeing?
Boeing is just beginning to get more aircraft orders than cancellations. So such a contract would be truly pivotal. It would be both a giant vote of confidence and a cash boost – although not from this year. A Southwest MAX-7 contract of this size, would certainly find imitators from other airlines. And this is important for another reason: the MAX-7 hasn’t really been selling very well.
The MAX-8 is the biggest seller in the new 737 line. This is hardly surprising, as its predecessor, the 737-800, was the biggest NG seller. The MAX-9 is also doing well. The -10 is more of a niche aircraft. But it is worth pointing out that Southwest only made those 30 initial orders, for the MAX-7. Why?
At the same time they ordered 280 MAX-8 aircraft, to replace 207 -800s! Some fleet growth can explain part of this, but why so few MAX-7s? The answer likely has to do with Boeing’s schedule to certify the jets. The MAX-8/9 were always going to be first. Perhaps Southwest was confident that it could wait for its MAX-7 order. They were always going to buy enough, to get a good price. But obviously the airline knew all along that its 737-700s would be first in line, for retirement.
The A220 As Southwest’s MAX-7 Alternative
Conversely, an A220 order from Southwest would be more than just a direct blow to Boeing. It could start the ball rolling on more Airbus A220 orders, from other US airlines. Such an order would also ‘buy’ a lot of sway, at Airbus. So far they have a backlog of just under 500 A220 aircraft. A single customer getting 300 more would certainly have some influence in the manufacturer. For example, Southwest could add to the push for a longer, A220-500 variant.
At present, there are two A220 versions: the A220-100 and the A220-300. The latter has 145 seats, in a single-class configuration. So it is quite close to what Southwest would be after, in the MAX-7. And as we have already seen, Airbus is already getting requests for such an aircraft, from Air France and others. The really interesting question here, is whether a hypothetical A220-500 could solve Southwest’s single-type problem, in the future.
And the answer to that, for Southwest (as opposed to Air France), is “probably not”. As efficient as the A220 is, it doesn’t have the range of the bigger Airbus and Boeing models. Southwest wants all its aircraft (MAX-7, MAX-8 and older) to be able to perform all of its routes. This is one aspect of its Low-Cost model. All its pilots being able to perform these routes with all aircraft, is another aspect. They would lose this if they go to a second type. But ultimately, they will lose this eventually, even if they stick with Boeing.
A Bigger Opportunity For Boeing?
Even if Southwest contemplated a complete switch to Airbus, the A220 doesn’t share a type rating with the A320 series. Southwest would need such a plane, to cover the upper end of its routes. So the smaller Airbus is NOT a way for the airline to avoid having more than one type. However, placing a big MAX-7 order now, could be a way for Southwest to ‘shape’ Boeing’s NMA to its liking.
And this is something that Boeing would likely welcome, as it commits to the NMA. The plane that many say Boeing should have started work on in 2011, is even harder to start with their current economics. So a partnership (and commitment) from loyal customers, would go a long way. If Southwest’s MAX-7 order comes, its terms could be quite interesting!