Southwest Airlines reported their third quarter earnings. At the earnings call, CEO Gary Kelly was asked about whether Southwest was considering other aircraft in the wake of the 737 MAX grounding. His answer, while not totally surprising, did raise some eyebrows. He stated that Southwest Airlines’ board of directors has asked the company to look at other options to diversify the fleet.
Southwest and 737s are like Peanut Butter and Jelly
Since Southwest’s first flight back in 1972, the airline has been a Boeing 737 airline. With the exception of a couple stints flying the 727 in the late ’70s and early ’80s, Southwest has flown every generation of the ‘baby Boeing’ jet to include the grounded MAX -8 series. Southwest has thrived with the jet. A single fleet type simplifies scheduling, training, maintenance, and operational equipment are all reasons why flying just the 737 made sense. Over the past decade with the 737NG series, Southwest has been able to offer transcontinental service and more recently unlock central America and Hawaii with a single type of jet.
Why would Southwest have a change of heart?
For Southwest, the MAX was supposed to represent a new era of service. With more efficient engines, Southwest would be able to add extended routes like Phoenix (possibly even Denver) to Honolulu and Houston to Central and South America. After the two 737 MAX crashes by LionAir and Ethiopian Airlines, the MAX was grounded back in March, taking 5% of Southwest’s fleet and expansion plans off the table for all of 2019.
The single fleet type that for so long was seen as a benefit, is now seen as a potential liability for the airline. With the MAX grounded and potential pickle-fork issues with NG-series jet, Southwest is beginning to realize that they could be in a very vulnerable position if there is another 737 grounding in the future.
The fact that Southwest might choose a second jet is far from a foregone conclusion. Southwest CEO Gary Kelly has a much more nuanced statement both in a CNBC interview and the recent earnings call after Q3-2019 earnings. In the call, Gary was asked to comment further based on the CNBC interview and discussion of Southwest needing to acquire a second fleet to remain competitive.
Gary replied, “Mike ([Van De Ven]-Operations VP) led that effort as late as 2011 when we agreed to launch the MAX. We gave a very serious look to an alternative…I wouldn’t prejudge the answer at all. We’ve been extremely successful for 48 years with a single fleet type. I know that our Vice President of Flight Operations would agree…So, there are plenty of good arguments for just I really feel like it’s just acknowledging the obvious and I feel like we have a duty to look at the question and especially in light of what’s going on right now. So, hopefully that answers part of the question.”
You can read and listen to the full call here. It makes for an interesting listen but it doesn’t exactly sound like Southwest is feeling an immediate need to stray from their winning formula very soon.
What could Southwest choose?
Even without an immediate push to acquire a second fleet, we are avgeeks and we love talking about the ‘what-ifs’ of the aviation industry. If Southwest decides to pursue a second fleet, they have a number of options on the table that they could select from and one fanciful one that makes us think…what if? We look at 4 potential options.