DALLAS- Due to rising costs and delays in Boeing 737 MAX deliveries, Southwest Airlines (WN) is implementing several measures, including removing multiple destinations from its network, encouraging employee time-off programs, and exploring potential seating adjustments. The airline, headquartered in Dallas, reported a first-quarter loss of $231 million.
Additionally, on April 25th, Southwest announced the conversion of orders for 19 uncertified 737 MAX 7 aircraft into orders for an equal number of larger MAX 8s.
Southwest 737 MAX 7
In the first quarter of 2024, Southwest received five -8 aircraft and retired three -700 aircraft, resulting in a fleet of 819 aircraft by the end of the quarter. Due to anticipated aircraft delivery delays and discussions with Boeing, the Company now expects approximately 20 -8 aircraft deliveries in 2024, down from the previous expectation of 46 -8 aircraft deliveries.
Consequently, to maintain fleet flexibility for 2025, the Company plans to retire approximately 35 aircraft in 2024 (31 -700s and four -800s), compared to the previous plan of retiring 49 aircraft (45 -700s and four -800s). This adjustment will result in a fleet of approximately 802 aircraft by the end of 2024. However, there is uncertainty regarding Boeing’s ability to meet this revised delivery schedule.
The Company’s flight schedule is available for sale through March 5, 2025. With lower aircraft delivery expectations, the Company anticipates second-quarter 2024 capacity to increase by 8-9%, third-quarter 2024 capacity to increase in the low-single digits, fourth-quarter 2024 capacity to decrease in the low- to mid-single digits, and full-year 2024 capacity to increase by approximately 4%, all on a year-over-year basis.
The Company expects aircraft seats and trip frequency to decline in the third and fourth quarters of 2024 compared to the previous year. Capacity growth beyond 2024 is expected to align with or be below macroeconomic growth trends until the Company achieves its long-term financial goal of consistently achieving an after-tax return on invested capital (“ROIC”) well above its weighted average cost of capital (“WACC”).
26 Lesser Planes
Capital expenditures for the first quarter of 2024 totaled $583 million, primarily driven by aircraft-related capital spending, technology, facilities, and operational investments. The Company estimates its 2024 capital spending to be approximately $2.5 billion, including around $1.0 billion in aircraft capital spending, assuming approximately 20 -8 aircraft deliveries in 2024 and continued progress delivery payments for contractual 2025 firm orders.
Recently, the Company entered into a Supplemental Agreement with Boeing regarding its contractual order book for -7 and -8 aircraft. This agreement addresses updates related to the continued -7 delay in certification and supports the Company’s fleet modernization efforts.
The agreement formalizes the conversion of 19 2025 -7 firm orders into -8 firm orders as of March 31, 2024, and shifts one 2025 -8 option into 2026 as of April 2024.
As of April 25, 2024, the contractual order book does not reflect delivery delays and may change based on ongoing discussions with Boeing.
Cutting 4 Destinations
Southwest Airlines has announced the closure of operations at four locations, citing Bellingham, Washington; Houston George Bush Intercontinental, Texas; Syracuse, New York; and Cozumel, Mexico.
Southwest CEO Bob Jordan said, “To enhance our financial performance, we have intensified our efforts in network optimization to address underperforming markets.”
Cirium data shows Southwest operates flights from Houston Intercontinental to Dallas, Denver, Chicago, Las Vegas, Nashville, and Orlando.
It serves routes from Bellingham to Denver, Oakland, and Las Vegas and offers flights from Cozumel to Austin, Denver, and Houston. Additionally, Southwest flies from Syracuse to Baltimore, Orlando, and Tampa, as per Cirium records.
Southwest Airlines expanded its service to four airports in recent years, Ishrion Aviation reported. Presently, the routes served from each airport are as follows:
- BLI (Bellingham) to LAS (Las Vegas), DEN (Denver), OAK (Oakland)
- CZM (Cozumel) to HOU (Houston), AUS (Austin)
- SYR (Syracuse) to BWI (Baltimore), MCO (Orlando), TPA (Tampa)
- IAH (Houston George Bush Intercontinental) to PHX (Phoenix), LAS (Las Vegas), DEN (Denver), MDW (Chicago Midway), BNA (Nashville), MCO (Orlando), DAL (Dallas Love Field)
The last instance of Southwest canceling a station was in 2019, affecting EWR (Newark) and MEX (Mexico City).
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