I’ve long pondered the future of Southwest’s fleet of 737-300s. It seems that the Texas-based carrier has planned to keep at least a significant portion of the fleet flying for the years to come, especially when one considers the installation of winglets on some -300s along with plans to upgrade some -300 cockpits to help facilitate Required Navigation Performance (RNP) operations that burn less fuel compared to traditional approaches.
Such a fleet plan makes sense. With these upgrades, the 737-300 becomes more fuel efficient. Paired with the fact that new airplanes are expensive, the -300 probably looks pretty good to Southwest from a total cost of ownership perspective.
But it would certainly appear safe to speculate that the depressurization event Southwest experienced a couple of weeks ago could certainly have some implications for its plans for the 737-300 series. “Obviously we’ll work with Boeing Co. to decide what’s the best reliability answer, what’s the best economic answer in terms of retirement versus replacement of new aircraft,” said Southwest CEO Gary Kelly at a recent conference when asked about the event’s impacts.
The current FAA Airworthiness Directive (AD) mandates inspections every 500 cycles for certain 737 Classics with a certain lap joint construction. According to DOT data, the average Southwest 737-300 had six daily departures in the third quarter of 2010. Roughly speaking, that means the aircraft affected by the AD would need to be inspected about every 83 days.
A press release from the FAA said that 80 aircraft based in the United States, mostly with Southwest, were affected by its Airworthiness Directive. The 737 Classics affected are line numbers 2553 through 3132, inclusive. These are some of the newest 737 Classics, produced from 1993 through 2000, according to Flightglobal.
Herein lies a problem for Southwest, I think. It would appear logical that the newest 737-300s would receive winglets and updated cockpits. According to Southwest’s 2010 annual report, 454 of its 548 aircraft are equipped with blended winglets. All of the 737-700s are equipped, and none of the 737-500s have winglets, so that leaves 102 of Southwest’s 171 737-300s with the modification.
It appears that the vast majority –over 75% – of Southwest’s 737-300s with winglets are affected by the FAA’s Airworthiness Directive, according to data from Ch-Aviation.ch. It seems safe to assume that at least a portion of this fleet could have been slated for cockpit upgrades as well.
So a question emerges – what will be the cost of the additional maintenance on the 737-300s affected by the AD? And how does this compare to the savings generated by winglets and cockpit upgrades later on? The answer will probably not be known until the Flight 812 (CHECK) incident is fully investigated.
If the benefits still exceed the costs, I figure Southwest’s plans will largely remain the same. But what if Southwest decides to begin accelerating the retirement of the 737-300?
Lately, Southwest has used its new 737-700 deliveries as replacements for retiring -300s, and the carrier could certainly continue doing so. According to Southwest’s annual report, Southwest has 88 737-700s on firm order in 2011 and from 2013 through 2017, and also has 37 options from 2013 through 2017. The firm orders alone outnumber the number of aircraft affected by the FAA’s AD.
But what about future capacity growth? In addition, what about Southwest’s evaluation of the 737-800? The carrier has said orders for this type would come from converting -700 orders. So far it has converted twenty 737-700 orders to -800 orders, all for delivery next year.
It’s also worth noting that future merger partner AirTran has 51 737 orders on the books for delivery from this year through 2017, according to its 2010 annual report.
Even if we completely ignore the events of the past few weeks, it is still fascinating to consider Southwest’s current thoughts on the 737-300. While the 737-700 has served as the traditional replacement for the type, is it still the best option?
Certainly an important factor in this scenario is Boeing’s plan for the narrowbody segment. Will the carrier announce a clean-sheet airliner in the near future? Or, will the manufacturer announce a re-engined 737, as predicted recently by Airbus’ John Leahy? If Boeing does indeed go with a new-build option, one also wonders if Boeing remains interested in producing aircraft near the size of the 737-600 and -700.
Airbus’ A320neo family is certainly another option that Southwest could consider. But that option isn’t the greatest, at least if you believe Boeing’s rhetoric. Boeing Commercial Airplanes President and CEO Jim Albaugh told the Seattle PI last month that the 737 has good operating cost performance, saying that “even after the re-engine we’ll be 2 percent better [than the Airbus offering], and that’s if we do nothing on this airplane,” he continued.
Of course, every aircraft producer will spin the numbers to make their product look the best, but one wonders if the benefits of the A320neo are enough to unravel a partnership between Southwest and Boeing that has lasted for nearly 40 years.
A third option – Bombardier’s CSeries – might have a compelling case at Southwest. The CS300 would seat around the same number of passengers as a 737-300 (137) while offering operating cost advantages over both the -300 and -700. Southwest’s 737-300 fleet is large enough that a CS300 order would not make for an orphan fleet.
In addition, the CS100 could be an interesting option for Southwest to consider as a replacement for its aging 737-500s and the AirTran 717s as those aircraft come off lease. A major question here, of course, is if Southwest still desires to operate smaller aircraft.
Maybe we’ll get some interesting nuggets from Southwest when the carrier announces first quarter earnings in the next few days.
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