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Southwest has graphically illustrated the bottom-line impact that delays to the Boeing 737 Max program is having on its business.

Southwest Airlines is the latest Boeing 737 Max operator to set out the scale of delivery delays. In a filing Tuesday, the carrier said there would be a reduction in the number of new planes it will receive in 2024. 

Southwest has been told by the manufacturer to expect 46 Boeing 737 Max 8 deliveries this year. That is down from the previous expectation of 58 aircraft. 

The delivery crunch is further compounded by delays to the 737 Max 7 program. The plane – which is the smallest of the Max family – has yet to be certified by regulators. 

The airline was previously expecting 21 Max 7s to be delivered in 2024. It has now slashed that figure to zero. In the regulatory filing, the carrier said it is assuming none of the jets are placed into service this year “based on the current certification status.”

Southwest is one of the aircraft’s biggest customers. It is relying on the Max 7 to replace its aging and less fuel-efficient 737-700 jets. 

In total, it means only 46 out of 79 737 Max planes are due to be delivered to Southwest this year.

Headaches for Max Customers

Southwest is not alone in experiencing delivery delays. Earlier this month, Ryanair CEO Michael O’Leary said he was “very disappointed” that new planes wouldn’t be ready for the summer peak. 

Ramping up production of its flagship single-aisle airliner isn’t easy for Boeing. Along with industry-wide supply chain problems, it also faces unique pressures. 

In late January, the FAA said it would not grant any expansion of production for the 737 Max program. This followed a serious incident onboard an Alaska Airlines plane on January 5 when a door plug blew off mid-flight.

Speaking more broadly about the 737 Max, Boeing CEO Dave Calhoun said last month that the plane maker “will earn trust back through demonstrated action and a commitment to total transparency.”

Southwest to Trim Schedules

In a statement, the Dallas-based airline said: “As a result of Boeing’s continued challenges, [Southwest] expects the delivery schedule to be fluid and, therefore, plans to reduce capacity and re-optimize schedules.”

The company says these capacity cuts will be “primarily for the back half of 2024”. This would likely result in “at least a one-point reduction” to the airline’s full-year capacity plans for 2024. 

Southwest also trimmed its Q1 outlook for a key profitability metric. Known as ‘revenue per available seat mile’ or RASM, this is an important industry figure to help show how efficiently an airline is making money. 

The company now expects this to be ‘flat to up 2%’ from a year ago, down from the 2.5% to 4.5% it previously advised. Southwest said softer demand for leisure travel was one of the reasons for the downgrade. 

Southwest Halts Hiring Plans

With fewer planes in the air and some of those that are flying being less efficient, Southwest also confirmed it is reviewing its prior guidance for 2024.

It expects to post a net loss in the first quarter of 2024; however, it still sees a return to profitability in March. The airline said it would lay out specifics during its Q1 results on April 25. 

Southwest also confirmed that it has halted new hires of pilots and flight attendants. It said this was part of “efforts to drive efficiencies” with the planned cuts to capacity also a factor.

The company now expects to end 2024 with fewer employees on a year-over-year basis. It had previously said its headcount would be flat compared to 2023.

This echoes recent developments from United Airlines, which also said it would pause pilot hiring due to late handovers from Boeing.

Despite the delivery delays and other headwinds, Southwest said it “is optimistic about the future and remains focused on making continuous adjustments to its operating plan.”


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Tags: Boeing, boeing 737 max, southwest airlines, supply chains, united airlines

Photo credit: Vincenzo Pace

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