Boeing Wins Massive New Southwest Order

Boeing (NYSE:BA) has won the order it couldn’t afford to lose, as Southwest Airlines (NYSE:LUV) has agreed to buy 100 additional 737 MAX jets and added options for 155 more through 2029.

Southwest historically has been a Boeing operator, but the company last fall confirmed it was evaluating an Airbus (OTC:EADSY) jet as part of its growth plans. Southwest was said to be dissatisfied with the terms offered by Boeing and engine partner General Electric (NYSE:GE), leading it to shop around.

A Southwest Boeing 737 in flight.

Image source: Southwest Airlines.

But the two sides were able to get a deal done, with Southwest CEO Gary Kelly issuing a statement saying, “We are proud to continue our tradition of being the world’s largest operator of an all-Boeing fleet.” With the deal, Southwest now has a total of 349 MAX planes on firm order and 270 options through 2031.

“Southwest Airlines has been operating the Boeing 737 series for nearly 50 years, and the aircraft has made significant contributions to our unparalleled success,” Kelly said. “Today’s commitment to the 737 MAX solidifies our continued appreciation for the aircraft and confirms our plans to offer the Boeing 737 series of aircraft to our employees and customers for years to come.”

The 737 MAX 7 planes that Southwest is ordering have a list price of $99.7 million each, but the airline likely received a substantial discount to the sticker price to win the contract. Still, the deal is good news for Boeing shareholders. A loss to Airbus would have been a symbolic blow for Boeing and its troubled 737 MAX, which was grounded for nearly two years after a pair of fatal accidents.

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“Southwest Airlines has long been a leader and bellwether for the airline industry, and this order is a big vote of confidence for commercial air travel,” Stan Deal, CEO of Boeing’s commercial unit, said in a statement. “Their fleet decision today brings more stability for our biggest commercial program and will ensure that our entire 737 family will be building new airplanes for Southwest for years to come.”

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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