WestJet to switch 15 737NG orders to Max

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WestJet will substitute 15 of its next-generation Boeing 737 orders with Max models under its letter of intent (LOI) with Boeing to purchase 65 of the new aircraft type, says the Calgary-based carrier in a release.

These next-generation 737s are scheduled for delivery from December 2014 to 2018. Deliveries of the 65 pending Max orders, made up of 40 737 Max 8 and 25 Max 7 aircraft, will begin in 2017.

WestJet would increase its Boeing orders by 50 aircraft with the deal, for a total of 92 commitments with the manufacturer.

The pending deal also includes a provision for "substitution rights" to replace these orders with the Max 9 model for delivery from 2017 to 2027, says WestJet.

Which specific next-generation 737 aircraft on order will be switched to 737 Max models is unclear. WestJet is expecting to receive one 737-700 and seven 737-800 aircraft in 2014, five 737-700s and five -800s in 2015, and 19 more 737-700s in 2016 and 2017, a table in the carrier's second quarter regulatory filings shows. The carrier notes that any of these -700 orders can be converted to the -800 model.

The order comes after WestJet's announcement in May that it would order 10 Boeing 737-800s and defer five 737-700s scheduled for delivery between 2014 and 2015 to 2016 and 2017. At that time it also made plans to sell 10 737-700s to Southwest Airlines, with deliveries split between 2014 and 2015.

When factoring in lease returns and the sale of those 10 aircraft, WestJet says its fleet in 10 years could be made up of as many as 162 Boeing 737s or as few as 120 of the aircraft depending on whether it chooses to renew any of the 33 leases set to expire between 2014 and 2018. The carrier now flies 103 of the aircraft type.

Prior to the Max deal, the carrier had said it could have as few as 102 or as many as 135 737s in the fleet through 2018. This is in addition to the firm 20 Bombardier Q400 aircraft deliveries the carrier will add from 2013 to 2018 and 25 options for the regional jet between 2015 and 2018.

WestJet says it expects to turn the LOI with Boeing into a definitive purchase order by the end of September. The airline will be the second customer to order the 737 Max after Southwest, which launched the aircraft type by converting 30 next-generation orders.

WestJet now expects to see capital expenditures of between Canadian dollar ($C) $210 million ($199.8 million) and C$220 million in the third quarter, compared to previous guidance of between C$100 million and C$110 million. For the full year, the carrier expects these expenses to rise to the C$690-C$710 million range compared to previous guidance of C$610 million to C$630 million. It plans to see its aircraft expenditures decrease between 2014 and 2017 because it is substituting the 15 737 orders with the Max.