Southwest to defer dozens of 737 deliveries

Washington DC
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Low-cost carrier Southwest Airlines will defer dozens of aircraft deliveries during the next two years, in a move that it says will save it $1 billion in capital spending.

The carrier's president and chief executive Gary Kelly announced the deferrals today in a meeting with shareholders, saying: "Until we hit our return on capital target, we don't plan to grow our fleet."

The deferrals will keep Southwest's fleet "roughly flat and maybe slightly down", says Kelly. "We will save over a billion dollars in capital spending over 2012, 2013 and 2014... it obviously also helps us lower our invested capital."

A revised fleet plan provided by Southwest today indicates that the airline will defer deliveries of 21 Boeing 737-800s in 2013, resulting in it taking only 20 aircraft during the year. An earlier fleet plan in the airline's first quarter earnings report had stated that it would take delivery of 41 737-800s in 2013.

In 2014, Southwest will defer a net total of 10 737 aircraft. According to the revised fleet plan, it will accept five 737-700s instead of 35 as stated in the previous fleet plan, and take delivery of 24 737-800s instead of four. Altogether, it will take delivery of 44 aircraft including options in 2014 instead of 54.

As a result of the deferrals, Southwest will take 15 additional aircraft in 2017, and another 15 additional in 2018. Under the revised plan, it will accept 30 737-700s in 2017 instead of 15, 25 737-800s and four 737 Max aircraft. In 2018, it will take delivery of 25 737-700s instead of 10 as originally planned, 28 737-800s and 15 737 Max aircraft.

Southwest expects to take delivery of 34 aircraft, all 737-800s, in total this year.