Southwest Airlines recently unveiled their latest strategy in an SEC filing on Friday. They have decided to exercise options for the acquisition of 30 Boeing 737 MAX 7 planes for delivery in the upcoming year. In addition to this, Southwest have transformed 24 of their existing orders from the 737 MAX 7 model to the MAX 8 model.
Boeing’s Delivery Delay and Southwest’s Response
Interestingly, this decision comes just two days after Boeing disclosed that the delivery of the 737 MAX 7 would be postponed until 2024. This delay is attributed to the ongoing process of obtaining Federal Aviation Administration certification for the narrow-body jet. Given this delay, Southwest’s move to change some of their MAX 7 orders to the MAX 8 model, which is currently in operation, is a wise strategy. This decision will certainly help soften the blow of the impending delivery holdups.
Despite the uncertainty surrounding the delivery of the MAX 7, Southwest Airlines remains optimistic. Their plan is to introduce the MAX 7 to their fleet “at some point next year”, as stated by CEO Robert Jordan during a post-earnings call on Thursday. However, he also noted that if that does not happen, they are fully prepared to incorporate MAX 8 orders instead.
Financial Concerns for Southwest Airlines
This strategic move comes at a crucial time for Southwest Airlines. On Thursday, the company released forecasts for the current quarter and the full year, which were not as promising as hoped. This, along with second-quarter results that did not meet estimates, has raised worries about the state of domestic travel demand in the United States. Yet, Southwest remains proactive and hopeful, as indicated by their recent decisions regarding the Boeing 737 MAX orders.
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