Southwest order of 94 jets is tops in carrier's history

Friday, June 30th 2000, 12:00 am
By: News On 6

Southwest Airlines Co. announced Thursday the purchase of 94 new Boeing 737-700s and options to order an additional 196 of the planes.

The purchase, which had been expected, represents the largest order of new jets in Southwest's 29-year history. Its last big jet order, for 34 Boeing 737-300s at a cost of $1.2 billion, was in 1992.

The Dallas-based low-fare carrier is rapidly expanding into the Northeast and adding new flights in existing markets. It had been in need of more planes to accommodate its growth over the next few years.

"We are overwhelmed with demand in our existing system," Herb Kelleher, Southwest's chairman, chief executive and president, said in a Thursday conference call.

Delivery of the 94 planes, which is estimated to cost $4.5 billion at Boeing's list prices, will begin in 2002 and last through 2007. About 20 percent to 25 percent of the new jets will be used to provide service to new cities, with the rest of the planes being used to provide additional flights in existing cities or for converting one-stop flights to direct ones.

In addition to the 94 firm orders, the nation's seventh-largest carrier has options to purchase 25 more 737-700s in 2008 as well as an additional 171 of the aircraft from 2009 through 2012.

The new jet order gives Southwest the flexibility it needs to grow its number of seats an average of about 8 percent each year through 2008, Mr. Kelleher said. The number of seats at the airline grew by 11.2 percent last year.

To cut maintenance and training expenses, Southwest uses only Boeing 737s. The 737-700, equipped with 137 seats, is the most modern aircraft in Southwest's fleet of 323 planes. However, under its new jet order, the airline can switch from the 737-700 to the larger 737-800 as long as it gives Boeing two years' advance notice. Currently, Southwest has no plans to do so, Mr. Kelleher said.

Southwest is Boeing's biggest customer for the 737s and negotiates special rates for the planes that it does not disclose. The airline will pay for the 94 planes using internally generated funds, Mr. Kelleher said.

This year, Southwest will spend $688 million to take delivery of 31 new 737-700s, followed by 23 of the aircraft in 2001. By 2002 when the new jet order kicks in, it will take delivery of 31 of the planes.

Southwest usually expands to two or three new cities each year. It recently announced it will provide service to Buffalo, N.Y., starting in October. In May, it launched new flights to Albany, N.Y.