To replace hundreds of Boeing 737-700s, Southwest will place a huge order. In negotiations with Boeing and Airbus, the low-cost airline is in a comfortable position.
Southwest Airlines has around 730 aircraft. This means that the low-cost airline’s fleet is larger than that of the entire Lufthansa group. For the aircraft manufacturers, therefore, the Americans are one of the proverbial big fish that they would particularly like to have on the line. So far, the success has been very one-sided.
Because it has always been of central importance for Southwest to keep costs low by having a standard fleet. And so the low-cost airline only flies with the Boeing 737. The fact that even a pure Boeing operator occasionally thinks out loud about buying from Airbus in the future helps in price negotiations. Ryanair has been doing this for years. The fact that Southwest toured publicly with the Airbus A220 in 2019 was therefore not a huge surprise.
Boeing 737 Max 7 vs. Airbus A220-300
With the Boeing 737 Max crashes and the subsequent grounding, however, the signs have changed. And in October 2020, Southwest boss Gerry Kelly said again that the A220 was in the running with his airline. Against the backdrop of the Corona crisis, Kelly said: “If there was ever a scenario for us to consider changing aircraft, it would be now because we are not desperately interested in the airline’s growth.”
It’s about the successor to Boeing 737-700, which make up around two thirds of Southwest’s fleet. Many of these will have to be replaced in the next five to ten years. As the successor, the airline is vacillating between the Boeing 737 Max 7 and the Airbus A220-300. Southwest has already ordered 30 Boeing 737 Max 7s, but given around 480 Boeing 737-700s that is a tiny number. That means: either Boeing or Airbus beckons a huge order here.
How much discount can Boeing afford?
The uniformity of the fleet continues to speak in favor of the Boeing aircraft. The Airbus A220-300, on the other hand, can, according to analysts from Air Insight 6 to 8 percent cheaper to operate. Southwest could use this argument to lower the purchase price of the 737 Max 7 at Boeing – so far, according to the analysis, that the deal would hardly be economically attractive for Boeing.
So what is the American aircraft manufacturer doing? Either he grants a discount that he actually cannot afford in the tense economic situation. Or he accepts that Airbus infiltrates the fleet of a large Boeing operator.
Boeing can hardly apply any more pressure
Something else has changed. While American airlines used to hesitate between a Boeing model and a Bombardier C-Series model, Boeing did not hesitate to put pressure on it with its economies of scale over the Canadian manufacturer. It has not worked since Airbus bought the C-Series and renamed it A220.
Because Boeing is now on an equal footing with Airbus. In addition, the combination of the 737 Max crisis, the Corona crisis and the failed Embraer takeover has weakened Boeing. The European aircraft manufacturer could currently rather allow itself to grant discounts in order to win a new customer with Southwest.
A220 “proudly built in the USA”
In addition, Airbus is now also building the A220 in Mobile in the American state of Alabama. The argument that American jobs would be lost if Southwest buys from Airbus is no longer an issue. Just this week, the presentation of the A220 cabin from Jetblue showed that this is definitely important. On the website, on which the airline presents the advantages of the A220 to passengers, it says: “Proudly built in the USA”.
Does that mean Southwest will choose the A220? Not necessarily. First of all, the airline will surely await the reaction of passengers to the return of their Boeing 737 Max 8 to service. And then she is in a very comfortable position to negotiate hard with both manufacturers over a large order.