Southwest Airlines to postpone delivery of 67 Boeing jets

© Reuters. Southwest Airlines planes are seen at LAX airport in Los Angeles© Reuters. Southwest Airlines planes are seen at LAX airport in Los Angeles

(Reuters) – Southwest Airlines Co (N:) will push back the delivery of 67 Boeing Co (N:) 737 MAX 8 aircraft by up to six years, delaying $1.9 billion of spending, the airline said Thursday.

The budget airline said it postponed the new deliveries to the 2023-25 timeframe to manage its capital spending. It also said in an investor presentation that the revenue environment remained “challenging.”

Shares of Boeing and Southwest fell after the announcement, which raised concern among investors about how long planemakers such as the Chicago-based planemaker can sustain demand for new jets, following years of orders that have created a sizeable production backlog.

Southwest shares retraced much of their losses in later trading, while Boeing was up as part of a broad market rally linked to optimism that Britain would remain in the European Union. ()

“We don’t see one airline having an impact on Boeing’s current plans for narrowbody production,” said RBC Capital Markets analyst Robert Stallard in a research note. However, he said the news was not assuring to investors.

“Having a well known, well run customer like Southwest deferring aircraft is likely to prompt concern that there are others to follow,” Stallard said.

Boeing shares dipped after the news but were up more than 1 percent at the New York Stock Exchange’s close.

In a statement, a Boeing spokesman said, “We continue to see healthy demand in the single-aisle market, with the Next-Generation 737 sold out of positions and the MAX sold out through 2021 …We were also able to find a mutually-beneficial way to sequence the growth of Southwest’s 737 fleet over the long term.”

The new schedule does not change Southwest’s debut as the first operator of the MAX 8 aircraft next year.

Southwest shares fell as much 5.1 percent in afternoon trading but were only down 1.7 percent at the close.

Dallas-based Southwest earlier said it moved up plans to retire its classic Boeing 737 jets to the third quarter of 2017 from 2018. The move was in part aimed at resolving uncertainty about U.S.-mandated pilot training for flying those aircraft and their next-generation model, the 737 MAX.

Stallard said the early retirements suggest that airlines’ move to fly older, less efficient planes while fuel was cheap “has potentially run its course, with oil back at $50.”

Southwest said Thursday it would advance six orders for 737-800 planes to next year from 2018 to help cover these early retirements.

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  • nathanmarcus

    It’s great to know Southwest will have about 723 planes by the end of this year, including two additional used 737-700s. The number of aircraft will then swing to just over 700 next year and to as many as 750 in 2018.