Southwest eyes capacity growth in 2015 with flat fleet

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Southwest Airlines could grow 2015 seat capacity in the range of 2-3%, even as it keeps its fleet flat.

The carrier's chief executive Gary Kelly says in an earnings call today that the growth would come from the upgauging effect of the airline taking on more Boeing 737-800s, placing out of service aircraft back into service, and other opportunities like growing the airline's network from existing airports and starting international flights from Houston Hobby airport.

Southwest, however, aims to keep its fleet flat in 2015 at around 695 aircraft, he says. "Unless we report otherwise, you should assume a flat fleet for 2015," says Kelly.

The airline's chief financial officer Tammy Romo says Southwest has flexibility in its 2015 capacity plan, adding that the airline's Boeing 737 Classics retirement plan is "built to optimise flexibility". Southwest ended the first quarter with 676 aircraft.

In 2014, the airline will take delivery of 33 737-800s and add at least 14 pre-owned 737-700s, says Romo. The carrier removed 22 Boeing 717s in 2013 that it was transitioning to Delta Air Lines, and the remaining 66 717s will be removed by the end of the year, she adds. Some of these will transition to Delta only in 2015.

As of the end of the first quarter ending 31 March, Southwest has transitioned 24 717s to Delta. It has also converted 21 of subsidiary AirTran Airways' 52 737-700s to Southwest livery and interiors, and will transition the remaining 31 by end-2014, says Romo.

Fleet aside, Southwest sees a boost in 2015 seat capacity from new growth opportunities in its network, including new flights from Dallas Love Field that will begin later this year as the Wright Amendment is repealed. The carrier also recently won new slots at Washington National and New York LaGuardia airports that were divested by American Airlines.

"It's really Dallas, the investment in LaGuardia and Washington National that carries us into 2015," says Southwest chief commercial officer Bob Jordan.

Both Jordan and Kelly emphasise that while Southwest's planned international flights out of Houston Hobby will contribute to the 2015 seat capacity growth, this will only be a small component.

"International is so small, and only a percent of our total capacity right now," says Kelly, pointing out that new international flights out of Houston Hobby will not begin until the fourth quarter of 2015. "It not going to have a material capacity impact on 2015. Vast majority of it is going to be domestic."

Southwest is paying for a new international terminal at Houston Hobby that it will launch the flights from.